What Is SaaS and Why Should I Care? - beginner's guide

SaaS stands for software as a service.
December 9, 2021

Nowadays, we spend most of our time online—surfing the net, working, playing games, watching movies, etc.

Therefore, it is easy to say that we contribute to the revenue of some companies—especially SaaS companies by using their products or services to our advantage.

My point that it plays a big role in our lives is proven since the statistics show that the SaaS industry has grown from $31.5 billion to an estimated $171.9 billion in just seven years, thanks to US—end-users.

So, what are these companies that we benefit from? How do they manage to engage us in themselves to reach such numbers? How do they work? How come we are preoccupied with them on a regular basis?

Today, we will learn more about SaaS to be able to answer all the questions you have in mind regarding SaaS, such as the ones above.

What Does SaaS Stand for?

SaaS stands for software as a service.

Software as a service is a means of providing applications over the Internet. These applications, however, are not created by you but by the cloud provider host. All there is left for you to do is use the cloud software as an end-user. I will be providing you with an example of this later.

As expected, various software programs offer business services to open new doors by boosting growth and improving the state of business. These programs generally propose cloud solutions to business owners on a subscription basis—such as database management, content management, financial management, human resource management, sales management, document management, and many more.

For example, think about the moment you arrive at work and turn on your laptop. You immediately check your emails through Gmail, which is an online email service that you access through your browser. This makes Gmail a software product that Google owns and Google its cloud service provider.

To elaborate, Gmail is a cloud-based software—one of the three categories that make up cloud services: SaaS, IaaS, and PaaS. The latter two are short for infrastructure as a service and platform as a service. Before moving on, let me briefly present to you the cloud computing trio:

  • Infrastructure as a Service: IaaS is a cloud computing service that offers cloud-hosted servers, networks, and storage for the business to run applications.
  • Platform as a Service: PaaS is a cloud computing service that offers a cloud-hosted ready-to-use platform for the business to develop, run, maintain, and manage applications.
  • Software as a Service: SaaS is a cloud computing service that offers a cloud-hosted software application.

What is the Software as a Service Model?

Software as a service has a model adopted for the users who utilize the product or service it delivers. Above all, this model provides that SaaS application users are able to access a cloud application of their choice through an internet browser. Thus, there is no need to download any kind of application for this model.

Secondly, most of the software delivery models offer software licenses and cloud-based applications for a period of time—generally on an annual or monthly basis— in exchange for a subscription fee.

Thirdly, there is one aspect of SaaS apps that rarely loses its importance—especially business applications due to high competitiveness: user experience. All of the cloud-based solutions the industry offers suffer from a big loss in the number of users when the user experience with the product or service is not satisfactory enough.

There is also another process that must be taken into account—the phrases a SaaS company goes through while following its business model: setup, growth, and stabilization.

How does it work?

SaaS works through a software delivery model. In order for the users to interact with the cloud products, a software provider has to host the application and associated data using all the resources within it. Then, the application will be available to any user with a network connection. The process of access to applications is maintained through web browsers. 

Since the users are the ones that make use of ready-to-use applications, they are not involved in the setup and maintenance processes of the software. Whether business users or personal users, they all have to pay monthly subscriptions to gain access to the on-demand software.

Why You Keep Hearing More and More About SaaS

The reason why you keep hearing more and more about SaaS is due to its popularity over traditional software business models. Here are the reasons that push business leaders to see SaaS as an attractive option:

✅SaaS does not require users to purchase, install or update an application on their computers. Therefore, some expenses, such as hardware acquisition, maintenance, software support, and software installation, are out of the picture—which would encourage cost-saving.

✅The workload on the in-house IT team is reduced thanks to the automatic updates and patches that the central provider performs. Thus, you do not need to pay for new software.

✅Users can easily access SaaS applications from anywhere since they do not require anything more than an internet connection, thanks to the software vendors who provide them over the Internet.

✅Users can customize their application according to their likes and integrate it with other business software applications—which would boost the workforce of users by providing a place where they can use all of their applications.

✅Since SaaS applications are already embedded in the cloud, there will not be any unforeseen problems or waiting times that would prevent you from finishing your task.

✅There will be no upfront costs thanks to the fact that you will not purchase hardware as your users grow in numbers. SaaS products will give you the benefit of adding new users without paying for additional physical software.

Top 4 Examples of SaaS Companies You Might Know

In this section, I will be proving to you that SaaS is in the leading position of our lives when it comes to productivity, thanks to the SaaS examples that we derive value from regularly. 

Before we start, let's learn how to differentiate the terms B2B (business to business) and B2C (business to consumer). B2B is when an exchange of products, services, or information occurs between two businesses, while B2C is when the same exchange happens between a business and a consumer.

So, here are four examples to go over what we have learned so far:

#1 Hubspot

Hubspot is a software platform that assists businesses in digital marketing by enabling them to boost the sales of their products and services. It is clear that Hubspot is a B2B SaaS company since it does business with other companies.

The business model of Hubspot is a subscription-based model that makes money via subscription plans while offering professional services that include tools to aid the process of digital marketing.

#2 Salesforce

Salesforce is a customer relationship management (CRM) specialized SaaS company that improves the connection between both current and potential customers and companies by offering suggestions regarding the steps to be taken for attracting customers. Salesforce is also a B2B company as it works with other companies.

The business model of Salesforce is a subscription-based model that makes money via subscription plans while offering professional services that include a range of packages concerning marketing, sales, customer service, etc.

#3 Netflix

Netflix is a content platform and production company that provides users access to stream series, shows, and movies on the Netflix streaming platform. Unlike the two above, Netflix is a B2B company because it is directed toward consumers, not companies.

The business model of Netflix is a subscription-based model that makes money via basic, standard, and premium subscription plans while offering a trip to the TV shows and movies it has on its platform without commercials on an internet-connected device anywhere you like.

#4 Spotify

Spotify is a digital platform that gives users access to millions of songs, podcasts, and other content from creators all over the world. Just like Netflix, it is also a B2C company since the business is done with consumers.

The business model of Spotify is a subscription-based model that makes money via freemium, premium, and family subscription plans while offering a great streaming service on an internet-connected device without interruption anywhere you like.

In Conclusion

Software as a service is a sub-branch of cloud computing that supplies a cloud application through an internet browser to its SaaS application users.

Most the companies benefit from software tools due to these advantages of SaaS applications:

  • Ready-to-use. Saas applications are already installed and configured.
  • Low costs. Software licenses are lower in cost compared to traditional models. In addition, maintenance costs are reduced as well.
  • Integration. SaaS applications can be integrated with each other, which does not require you to purchase a new application or server.
  • Upgrades. When the provider upgrades the application, all you have to do is wait for it to become available.

As you can see, what the SaaS industry offers is out of this world. That is why in this article, I have briefly explained what SaaS is, how it works, its advantages, and some examples to make it clearer for you.

Renk Mert