What Is SaaS? Defining Software as a Service

Updated: 08/21/2024 - 9:25

Time to read: 6 minutes

SaaS, or software as a service, is a term that describes cloud-based programs companies can buy as an alternative to applications installed on hardware.

If you've ever saved a Google document, opened a spreadsheet in Salesforce, or connected with a colleague via Slack, you've used a SaaS product.

What Is SaaS?

SaaS allows companies to launch very sophisticated programs in the cloud without installing any software. A SaaS product may seem exactly like any other program you might launch on your computer. Except, you access these services by heading to a web browser or app instead.

The first SaaS product was built in the 1990s, but the concept didn't really take off until the use of the cloud became mainstream. When people understood that they could save a great deal of data outside of their company's facility and still maintain security and usability, using SaaS started to make a great deal of sense.

The use of SaaS is only expected to increase. Gartner predicted, for example, that the market segment would grow to $141 billion in 2022.

When the pandemic hit and many workers had to do crucial tasks at home, SaaS was a lifeline. Employees needed only a functional internet connection to tap into their resources and remain productive.

Without SaaS, armies of IT techs would need to install software on computers to keep staff engaged. With SaaS, that wasn't necessary.

Some of the most sophisticated tools you might use during a workday stem from SaaS. Well-known examples include:

Autodesk
DocuSign
Dropbox
Slack
Spotify

SaaS apps range from communication software, to project management tools, to music streaming—and beyond.

You may work with programs in this family without even realizing it.

How Does SaaS Work?

Clearly, there is a lot of variety within the SaaS market. At first glance, products like Dropbox and Slack have little in common. But the basic structure that lies beneath these tools is the same.

Any SaaS solution relies on:

Software. As the name implies, software as a service starts with some kind of electronic program that developers and coders created.
The cloud. The software and its data exist within the cloud. A company doesn’t buy software and install it on every machine. Instead, users head to the internet, find their login page, and get started.
Fees. Most SaaS companies set pricing based on the number of users. If you have 10 customers or employees, you'll pay less than someone that has 100 or 200. But the structure can vary.

Some companies offer customization. If you need the software to do something very specific that may not appeal to anyone else, you could ask a company to modify an off-the-shelf product to suit you. Many customers ask for this capability, and more SaaS providers are ready to respond as a result.

Known SaaS Advantages

Why should you use a program that sits in the cloud rather than installing something on your machine? SaaS has several benefits, and they could be enough to encourage you to join in.

A standard SaaS product could offer you:

Data transparency. More than 99 percent of organizations believe in the value of data and analytics. SaaS products often come with robust data collection tools, and some offer visualization options to help you make sense of the numbers.
Easy access. Let your employees and customers tap into your tools from any web browser or app, even if they're not working on a machine you own and control.
Robust security. SaaS vendors can update their software without taking your servers offline. If a threat emerges and the company issues an urgent patch, all of that work happens behind the scenes and is invisible to you.
Savings. Outsource IT responsibilities and let the SaaS vendor troubleshoot problems. Pay fees based on users rather than footing the bill for software for all machines.
Supported growth. If your business explodes and many more people need to join in, add more seats to your subscription. Scaling up takes mere minutes.

The SaaS market is vast, and every product is different. As you look for solutions, you may find a product that comes with even more benefits than those mentioned here.

Known SaaS Disadvantages

While some people appreciate the benefits that come with SaaS products, some companies encounter difficulties that make them wish they'd stuck with traditional options.

Common problems associated with SaaS include:

Data ownership. For many companies, data is a critical asset. Your technologies, customer sets, and files are crucial items you can monetize and work with. Some vendors write up contracts with vague language regarding data. You could unwittingly give this vendor access to your assets, and it could be difficult to regain them.
Security. Some SaaS companies prioritize security, but others simply don’t. While most vendors do their best to keep their products safe and secure, cloud data theft happens, and it can be expensive. You must choose your SaaS product carefully and ensure you're working with a company that protects what is yours.
Uptime. Your employees and customers need a reliable internet connection to do their work. If your WiFi goes down, your work could grind to a halt. Some companies offer an offline function, so you can work until your connection is restored. But that isn't available in all SaaS products.
Vendor loss. Market forces stand behind most startup failures. If you choose a product you need (but no one else does), the company could go out of business. You could be left with nothing in those situations.

Some companies also struggle to find a program that does exactly what they want it to do. And customizations usually mean paying more for SaaS products than traditional software.

Work With Okta

At Okta, we offer SaaS identity and access management solutions for companies just like yours. Okta brings simple and secure access to people and organizations everywhere.