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What is SaaS? The modern way to run software

Bob Violino | Sept. 25, 2017
The era of installing software from a CD or from a datacenter’s server is coming to a close, as internet-delivered software makes applications available anywhere, anytime.

One of the most popular forms of cloud computing is software-as-a-service (SaaS), defined as a software distribution model in which a service provider hosts applications for customers and makes them available to these customers via the internet.

SaaS is one of the three major categories of cloud services, along with infrastructure-as-a-service (IaaS) and platform-as-a-service (PaaS).

Given its ease of access, SaaS has become a common delivery model for many types of business applications, and it has been incorporated into the delivery strategies of enterprise software vendors.

There are SaaS offerings available for a variety of business applications, including email and collaboration, customer relationship management (CRM), billing/payroll processing, sales management, human resources management, financial management, database management, enterprise resourcing planning (ERP), content management, and document editing and management.


How SaaS is delivered

As with other cloud services, organizations typically pay for SaaS through a subscription fee, on a monthly or annual basis. This contrasts with the traditional model of paying for software through a perpetual license, with an upfront cost and optional ongoing support fee.

SaaS providers usually price applications based on some type of usage parameters. For example, they might charge based on the number of people using the application, the number of transactions, or some other measure of usage.

Users typically access the applications using a web browser; in some organizations, they may also use a thin-client terminal.

Most SaaS offerings are based on a multitenant architecture, in which a single version of an application is used for all the service provider’s customers.

Organizations using SaaS applications can change configuration settings and customize the software, within certain parameters, to meet their particular needs. But they can’t customize its code or features to the same degree that is sometimes possible for enterprise software they install locally on users’ PCs or provide from their own datacenters.


How SaaS can save enterprises money

Among the top reasons for using SaaS is it saves organizations from installing and running applications on their own systems. That eliminates or at least reduces the associated costs of hardware purchases and maintenance and of software and support. The initial setup cost for a SaaS application is also generally lower than it for equivalent enterprise software purchased via a site license.

Sometimes, the use of SaaS can also reduce the long-term costs of software licensing, though that depends on the pricing model for the individual SaaS offering and the enterprise’s usage patterns. In fact, it’s possible for SaaS to cost more than traditional software licenses. This is an area IT organizations should explore carefully.

SaaS also provides enterprises the flexibility inherent with cloud services: They can subscribe to a SaaS offering as needed rather than having to buy software licenses and install the software on a variety of computers. The savings can be substantial in the case of applications that require new hardware purchases to support the software.


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