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What is SaaS?

By John Lister
Updated May 16, 2024
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SaaS is an abbreviation for Software as a Service. Technically this means that software is licensed and paid for based on how much it is used, rather than as a flat rate. In practice, the term is more commonly used for software which runs over the Internet. The idea is that the customer is paying for the service that the software provides rather than for the software itself.

In many, but not all, cases a SaaS product will be set up so that the software manufacturer uses the Internet to provide services to clients rather than the software needing to be installed on the client’s computers. This idea is also commonly known as cloud computing. Such a set-up is not necessarily a new idea: for example, many people have used webmail services such as Hotmail. In these situations the software which sends, reads and organizes e-mails is not on the user’s machine. Instead they access it via their web browser.

In some situations, SaaS can work on a different model. For example, the software could be installed on the user’s machine and then remotely disabled when their licensing deal ends. However, SaaS is most commonly linked to the cloud computing model and most of its perceived advantages and disadvantages are based on that set-up.

There are several advantages for both users and software companies of the system. The user does not need to devote as much disk space or other resources on their computer to the software on their system. The software producer has less to worry about in terms of software being illegally copied. Any updates and bug fixes can be carried out instantly rather than having to be sent out to individual machines.

One of the biggest concerns users have about this model of SaaS is security. There are inherent risks in sending confidential data to and from the servers which hosts the software, meaning every document created using the software must be treated as potentially less secure than one kept solely on a company network. Most SaaS providers will have very strict controls designed to protect against any data security breaches and to reassure customers.

SaaS can also be problematic if the company hosts the software online and then has a system or Internet connection problem. This can leave users unable to use the software, which can disrupt their work. Many suppliers make guarantees of how little this will happen, though these can be misinterpreted: a “99% uptime guarantee” sounds impressive until you realize that it would allow the service to be unavailable for almost four days each year. Of course, if a user loses their own Internet connection, they will also be unable to use the software.

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