What Is SaaS? Understanding Cloud-Based Software

Recent research by Statista shows that the Software as a Service (SaaS) market could exceed an impressive $390 billion in 2025, with an annual growth rate of over 19% between 2025 and 2029. Thus, applications delivered to end-users via an Internet browser are becoming increasingly popular and in demand compared to other services using other business models. By employing a SaaS product or platform, you don't even have to think about things like maintaining the underlying infrastructure, as it is all taken care of by the vendor. Instead of buying complex and demanding (in terms of maintenance and upkeep) software, you can opt for a SaaS platform and get only the features you need on a relatively inexpensive paid subscription. 

Understanding the SaaS Model and How It Works

In simple words, SaaS is a computing model where users access software solutions through the Internet infrastructure. That is, you don't need to install software on your device or corporate server and maintain it periodically. Since you don't have to worry about where the source code will be stored and executed, this approach to working with digital tools is more convenient, flexible and often cost-effective. 

Emerging around the 2000s, SaaS is now a mainstream form of software deployment. Proposing a subscription with automatic updates, support and scalability, this model allows many companies to reduce IT infrastructure costs. Moreover, SaaS technology has enabled developers to deploy and enhance their products faster with minimal downtime. Today, you will most often deal with IaaS (products running on leased infrastructure) and PaaS (platform as a service) solutions that provide end-users with uninterrupted availability as well as good scalability (in terms of both features and number of users). 

Key Features and Advantages of SaaS Products

With several unique characteristics, SaaS products provide several benefits to users:

1. Accessibility and ease of use. Virtually any modern SaaS solution can run on both desktop and mobile devices via an Internet browser. The user can authorise in the system via desktop PC or laptop, tablet or smartphone without worrying about software compatibility issues. That is, you don't need to install and maintain a digital tool or adapt devices to work with it.

2. Flexible pricing thanks to a well-thought-out subscription model. Previously, companies had to buy licenses for the software tools they use. With SaaS products, you pay a monthly or annual subscription, thus avoiding high upfront costs. Most SaaS companies offer a variety of subscription options that vary in cost and the number of features available. Thus, this model makes powerful software solutions available to large companies and small startups alike.

3. High data security and automatic updates. A key advantage of SaaS is that the vendors take care of bug fixes and new software releases, so you don't have to administer the software yourself on your side. Thus, you save yourself from any risks related to outdated software.

4. Excellent scalability and the ability to integrate with existing systems. You can easily customise the SaaS platform to meet the needs of your business, taking into account the features you require and the number of customers you have. Thanks to its modular structure, you can quickly and easily connect or disconnect tools and integrate them with accounting systems and other solutions.

5. Availability and high resilience. Operating in a cloud environment, SaaS solutions work stably even at high load while storing all important data in distributed data centers with backup technology. 

Thus, the SaaS industry is extremely important today as it provides access to complex and powerful software that is too costly to use in on-premises environments. 

What Is a SaaS Company and How Does It Operate?

In simple terms, a SaaS company is a developer of a service as a product that maintains it and provides access to it on a paid subscription basis. Unlike more traditional software developers, a SaaS organization does not sell licenses to install their digital products. Instead, they use their own or leased infrastructure to deploy services and make them available to customers over the Internet. 

That is, SaaS companies are responsible for the entire infrastructure, including hosting, regular updates, scalability and information security. Additionally, they also manage the platforms, operating systems and middleware. Thus, their services are attractive and affordable for businesses of all sizes. 

Leading SaaS Examples

From enterprise software to highly specialised solutions and data security systems, the SaaS industry covers a huge number of areas today. Below, you will find examples of the leading companies driving the SaaS market:

·  Microsoft. Originally known for its popular operating system, Microsoft is now one of the largest SaaS providers, offering a variety of cloud solutions with Azure and Microsoft 365.

·  Adobe. Like Microsoft, this company initially provided its digital products under separate licenses. However, having realised the benefits of the SaaS approach, it now distributes Photoshop, Illustrator, Premiere Pro and other popular solutions via a cloud service on a paid subscription basis.

·  Shopify. One of the leaders in e-commerce, Shopify has been able to achieve its leadership position largely due to its SaaS approach. Also, with its solutions, including an online shopping interface, order management and payment acceptance platform, it has simplified the entry into online commerce for many small businesses. 

Although cloud computing has been around since the late 1990s with companies like Concur or Amazon, it was Google in 2004 that offered a SaaS product (the Gmail email service) that was mass-marketed to consumers. According to Statista, the number of Gmail users was 1.5 billion as of 2019. 

Advantages of SaaS for Businesses

Cloud technologies are now an integral part of the business environment. They are highly popular as they offer many competitive advantages to businesses:

1. Low entry threshold. Since the cost of SaaS products is limited to subscription only, even small companies get access to the modern technologies necessary for their development and stable growth in a highly competitive environment.

2. The ability to easily customise to meet specific business needs. That is, you can seamlessly connect additional modules and tools, switch to more advanced or reduced tariff plans, add new users and much more.

3. Accessibility from anywhere in the world, which is great in today's environment where remote and hybrid working is becoming the new norm.

4. No need for maintenance as SaaS solutions are fully managed by the providers. 

In addition, SaaS companies make serious investments in cybersecurity to ensure the safety and reliability of their products. 

Cost Effectiveness Driven by the Paid Subscription Model

From freemium options where basic features are available for free and premium ones require payment to monthly or yearly subscriptions with the option to pay only per user or per usage, SaaS products are truly beneficial even for small teams. By integrating SaaS products, you don't have to buy expensive hardware or hire IT professionals. In addition, the paid subscription option makes your costs much more predictable than with the traditional option of purchasing a software license. 

Challenges and Risks in the SaaS Industry

On the one hand, hosting digital products on remote servers is an advantage because you don't need to invest in hardware and staff to maintain software solutions. However, on the other hand, by using SaaS products, you face serious risks due to dependence on the provider's infrastructure and potential cybersecurity issues. 

Downtime and Reliability Issues

Although developers and providers of modern solutions configure the infrastructure and code to maximise SaaS uptime (non-stop operation time), failures can occasionally occur, resulting in software downtime. There are at least three reasons why such failures occur in SaaS solutions:

1. Hardware or code problems in the data centres.

2. The provider has not adequately scaled the infrastructure as the number of users grows.

3. Failed upgrades that are usually done right on the fly when services are still available to customers. 

These problems are usually solved by deploying tiered data redundancy systems as well as content delivery networks (CDNs). To choose a reliable SaaS tech product, always consider the reputation of the provider and the availability of backup solutions. Also, read the service level agreement (SLA) carefully to learn about any potential pitfalls. 

Security, Compliance, and Data Protection Problems

Any SaaS system is a potential target for hackers as it stores highly valuable user data on remote servers. Therefore, SaaS products face security threats such as DDoS attacks and data breaches. To ensure the protection of sensitive information, special standards such as GDPR, HIPAA and other regulations (depending on the region and country) have been developed. 

Unfortunately, it is impossible to ensure 100% protection of all transmitted data, even though providers use advanced encryption protocols, two-factor authentication and data localisation under regional laws. If you use SaaS, you need to implement your cybersecurity strategies and conduct regular security audits to identify potential vulnerabilities on time. 

How AI and Big Data Impact SaaS Industry Development

The ability of AI to process and analyse large data sets quickly and efficiently never ceases to amaze. Many developers of SaaS solutions are actively implementing AI-based tools to make their products smarter, more efficient and safer:

·  Automating the execution of routine processes. Advanced AI algorithms can analyse user actions and offer optimal solutions without human intervention. For example, this allows you to significantly reduce the load on the helpdesk.

·  Advanced personalisation, taking into account a variety of different parameters that determine user preferences and behavioural traits.

·  Predictive modelling through the use of machine learning. Modern SaaS platforms use AI/ML to identify trends and anomalies and anticipate user requirements and demands. 

Increasingly pervasive in the SaaS industry, AI and big data will help developers improve product functionality and enhance their value to end customers. 

SaaS vs. Traditional Software

Conventional software distributed under licence still retains its niche. However, today SaaS solutions are steadily dominating the market due to their advantages mentioned above in this article. Let's look at the key differences between these two approaches. 

Choosing the Right Solution for Your Business

Integration issues, limited scalability, and pointless costs are just a few problems among the many you will face if you choose the wrong SaaS product. So, to avoid most of the issues and risks, consider the factors below:

·  Relevance to your needs and key business objectives. Focus on specific needs (e.g., marketing or workplace automation) to eliminate unnecessary functionality and minimise the SaaS fee you pay.

·  Evaluate compatibility with the solutions and systems you already use. For example, many businesses choose products that integrate well with CRM, accounting systems, payment services and cloud storage.

·  Security and compliance. Pay attention to whether the product you're considering is compliant with GDPR, HIPAA, ISO 27001, and other standards (depending on the region where you operate). Also inquire about data encryption technology and the availability of multi-factor authentication.

·  Pricing model. Learn about scalability, any hidden fees, and how flexible the subscription is (monthly, annual, and other options). 

Choose a solution with a free trial period so you can test key features, evaluating speed, efficiency, interface usability, functionality, and more. This way, you can avoid any potential problems, including those related to integration, costs, and security. 

FAQ 

What if the SaaS provider closes the business?

Always thoroughly review data storage and export policies before purchasing any software product. Typically, reliable SaaS companies allow you to upload data in standard formats (CSV, JSON) or integrate it with other services. 

Is it possible to migrate from one SaaS solution to another without losing data?

Although many platforms offer migration tools, such migrations usually require expert manual intervention. 

Why do some SaaS products hide prices on their websites?

Focused on business scale, number of users and additional features, some providers use customised pricing. While this allows for more flexibility in customising terms and conditions, price transparency is reduced. Contact support experts to learn more about pricing plans.

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