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Software as a Service (SaaS)

What is Software as a Service (SaaS)?

Software as a Service (SaaS) is defined as software that is licensed to a company or end-user, often as a subscription-based service. Businesses don't have to maintain software on their own computers and can often access SaaS programs from any device.  

What are the Characteristics of SaaS?

As SaaS grows in popularity, its uses have expanded. However, SaaS tools do share common characteristics.


SaaS applications generally rely on subscription pricing for company licensing and offer a certain level of customization and configuration capabilities to meet the specific needs of software. The software is designed to be scalable and accessible over the internet with applications being hosted on a centralized server. SaaS apps also centralize data storage and management, typically within a secure cloud environment, to enable easy access, sharing, and collaboration on data among authorized users.


These applications are designed with a multitenant architecture where a single instance of the software serves multiple customers or tenants. Although each customer shares the same underlying infrastructure, their data and configurations are isolated and secured from each other. This characteristic of SaaS allows for more efficient use of resources as well as cost-sharing among multiple customers.


Instead of relying on companies to perform updates, SaaS apps often update automatically. Plus, most SaaS providers offer support for their applications for retention and customer success purposes.


Another important characteristic of SaaS is that these applications operate according to a shared responsibility model. In short, the provider handles the underlying platform (managing the infrastructure and technical aspects of the application), and the customer focuses on utilizing the app and managing their data and user settings.

How Does SaaS Work?

Instead of relying on internal developers, businesses will connect with a SaaS provider who is responsible for hosting and developing the application. The SaaS provider will normally charge an annual or monthly fee for access to the software, and the business will enter into an agreement with the provider after SLAs have been reviewed and approved.


While maintaining, updating, and managing the software falls on the SaaS provider, it's the client's responsbility to input data, manage user access, and configure their application settings. Athough SaaS providers offer certain levels of data protection, including infrastructure redundancy and limited data retention, these built-in measures may not meet all organizations' data protection or extended retention requirements. With that, SaaS clients may need to see out other compatible solutions that provide the additional security features, measures, or controls needed to protect customer data, such as:

  • Advanced threat protection
  • Encryption
  • Identity and access management (IAM)
  • Security information and event management (SIEM)

What are the Pros and Cons of SaaS?

The advantages of SaaS include:

  • User-friendly and easy to access
  • Flexibility to scale up or down to suit the end-user's needs
  • Rapid deployment due to SaaS apps being ready-to-use, cutting out lengthy development cycles
  • Access to the latest features and changes in technology without needing to invest time and resources into software upgrades
  • Centralized management and support
  • Reduced capital expenditures (CapEx) due to SaaS providers typically handling maintenance, updates, and support, further reducing the cloud total cost of ownership

On the other hand, the disadvantages of SaaS include:

  • Although SaaS apps often offer customization options, they may be unable to fulfill all of the unique requirements of an organization
  • Excessive costs can occur due to the improper management or usage of tools
  • Reliance on an internet connection and outside provider for access - internet outages or provider outages can affect business continuity.

Data security and privacy concerns can be an additional con of SaaS. While SaaS providers implement security measures, organizations need to evaluate the provider's security practices, data encryption methods, access controls, and compliance certifications to ensure data protection and regulatory compliance. Also, organizations operating in highly regulated industries may face compliance challenges so they need to ensure the SaaS provider meets necessary compliance requirements and can provide the required security controls and auditing capabilities.


What is the difference between IaaS vs PaaS vs SaaS?

IaaS, PaaS, and SaaS are different cloud computing service models. Infrastructure as a service (IaaS) concerns the computing level, platform as a service (PaaS) provides an environment for organizations to develop and deploy applications, and SaaS gives users access to cloud-hosted software applications.

Examples of SaaS

Examples of SaaS applications can be found across business operations. Accounting may be done through QuickBooks Online or Xero. Customer relationship management (CRM) tools include Salesforce, HubSpot, and Microsoft Dynamics 365. Project management software, such as Asana or Trello, can help get teams aligned on tasks.

SaaS vs On-Premises

Businesses may make the move from on-premises software to SaaS applications as part of a larger modernization effort. In fact, some on-premises software has a SaaS counterpart, like QuickBooks.


On-premises software differs from SaaS in a few key ways, including:

  • The user installs and manages the tool
  • Although the purchase of the software is a one-time cost, there are additional expenses companies may incur when using on-premises software
  • Companies can choose to purchase maintenance and support agreements from the software vendor
  • Down the line, users may opt for newer software versions with enhanced features, improved security, and/or bug fixes, which may involve additional costs for purchasing the upgraded license or paying upgrade fees
  • Organizations must allocate resources for IT staff to manage, maintain, and administer the on-premises software, including installation, configuration, monitoring, troubleshooting, and security management
  • Companies must invest in their own hardware infrastructure to host and run the software, such as servers, storage, networking equipment, and other hardware components

What are the Key Developments in the SaaS space?

While SaaS started to gain popularity more than two decades ago, new developments continue to shape the space.

  • Subscription economy: Subscriptions have become a more popular business model for software companies in recent years. With subscription pricing, businesses only pay for what they need on an on-demand basis, and software companies can improve retention rates for customers.
  • Vertical SaaS: As technology advances, businesses are looking for industry-specific solutions to their problems. Vertical SaaS involves developing more all-encompassing software with a specific industry or group of industries in mind.
  • AI and machine learning: More personalized, predictive, and adaptive software has come out thanks to artificial intelligence and machine learning.

How TierPoint Can Help You Manage SaaS

Adding SaaS applications to your technology stack can make things easier, but the complexity comes from managing licenses, determining the right integrations between tools, and figuring out the right level of cloud service for your workloads. Don't fall victim to software bloat or unnecessarily complicated processes. We can help you achieve your digital transformation goals while making your processes more efficient.


At TierPoint, we offer application modernization consulting alongside managed application services with industry-leading SLAs.

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