What is SaaS? – Definition

In the modern world of information technology, cloud services are undoubtedly one of the most highly invested areas. The cloud model provides users with ubiquitous and convenient network access on demand to groups of computing resources (e.g., networks, servers, storage systems, applications, services) that can be quickly provisioned or returned with minimal effort to manage and interact with the service provider.

Today, cloud technology is one of the most popular trends, widely discussed by various companies and analysts. Due to the lack of high upfront costs and low cost, SaaS (“software as a service”) is among the predominant trends in this area. 

In this article, we will consider in detail what the SaaS model is and where it is applied. In addition, you will learn what the features of this model are, as well as its advantages and disadvantages. In the end, we will consider the areas where the SaaS model has found practical application.

What is SaaS and Where is It Used?

Software as a service (SaaS) is a cloud-based software delivery model in which a service provider develops cloud software, ensures its maintenance, automatic updates, and availability, and provides such software to customers over the Internet for a proportional subscription fee. The public cloud provider manages all hardware and standard software, including middleware, software applications, and security. This enables SaaS customers to significantly reduce costs, deploy, scale, and upgrade business solutions faster than on-premises systems and software, and calculate their total cost of ownership with greater precision.

The model places high demands on the reliability of data centers since that is where customer data is stored, and a secure data transfer protocol is used to access it. Secure Socket Layer (SSL) technology is used when accessing the application, which masks client information using authentication servers. This helps protect the data while only allowing access to logged-in users within the company. SSL is simple to understand: it sets encryption methods and keys on both sides. It lays out an encrypted tunnel over which other protocols (such as HTTP) can be transmitted. 

The concept was first mentioned in the 1950s but became more widely used in the 1990s. Many experts in the field of information technology believed that during this period, on the one hand, the model demonstrated its viability, and on the other, it took a niche position in the field of IT. In general, this model has long since moved from the status of innovation to the status of a generally accepted model, which indicates that it has consolidated its position in the market, which allows it to develop in one direction or another. The term SaaS led to the emergence of such concepts as XaaS (“anything as a service”), which includes IaaS (“infrastructure as a service”) and PaaS (“platform as a service”). The SaaS model was the basis for the development of similar cloud solutions.

Features of the SaaS Model Operation

The main difference between SaaS as a business model is that the service owner is fully responsible for its upgrade, maintenance, and management. To use the platform’s functionality, users do not need to download software, install it and update it. For business owners, the SaaS model has become a real salvation from the many problems customers may encounter with unlicensed software.

The principle of SaaS services is often compared to rental housing. The owner provides furniture, equipment, and all the amenities, and the tenant pays for the use. However, this comparison is not correct because it is rather superficial. The distinctive feature of this model is that it is intended only for remote use, and the service can be used by several people at a time, which helps to unite the team’s work. Payment for the use of functionality is charged as fees for a certain period or the number of selected services. There is technical support, and the service owner is responsible for the smooth operation of the service.

In addition, an important aspect of such a work plan is that the company does not need to purchase server hardware and engage the services of individual IT professionals and programmers to maintain and support the specialized programs, as well as to maintain servers, install updates and perform many other tasks, which are not typical for this particular business and that require substantial expenditures. Due to their relatively low cost and ease of use, SaaS platforms are rapidly growing in popularity these days.

SaaS Model: Advantages and Disadvantages

Now that you know what the SaaS model is and what its features are, it’s time to consider the main advantages and disadvantages that are inherent to such systems.

  • Advantages of the SaaS Model

First, let’s look at the benefits of using the SaaS model for business.

  1. Flexibility

Most services provide a set of data plans or flexible custom functionality. This means that you can customize your plan based on your current needs. Then you pay only for what you need and nothing more. For example, IP-telephony: if you need a personal number, you can choose the cheapest basic plan, and if you need to connect your company to the telephony, you can choose the business plan. Each plan has up-to-date functionality and support options.

  1. Integration

The development of services working on the SAAS model provides the ability to integrate with other applications and combine their capabilities into a single system. This suggests that it is easy to expand functionality, select individual tools and solutions for specific business tasks, as well as personalize settings and select only those features that your business needs.

  1. Cross-Platform

SaaS systems work on any platform and device. App tenants do not need to choose which system to work with, and the service owner does not need to worry about technical content on different platforms. Cross-platform and cross-browser capabilities allow the use of SaaS projects for different tasks, which is one of the most significant advantages of the SaaS model working in combination with other solutions and products.

  • Disadvantages of the SaaS Model

Now let’s look at the significant disadvantages of the SaaS model. 

  1. Dependence on the Internet

The use of solutions working on the SaaS model requires a permanent and stable connection to a high-speed Internet channel. Although some programs and applications compensate for this with offline modules, such as the ability to edit documents without an Internet connection in Google Docs, the program will not work completely offline.

  1. Version Problems

While it is usually a plus for SaaS to ensure that all users use the latest version of their software, there are times when a company would prefer to stay on an older version of the software for user training, integration with other hardware or software, or certain critical features that are specific to a certain version only. However, this is impossible with SaaS, which constantly updates all users to the latest version.

  1. Insufficient Data Security

This is one of the main issues for companies choosing a SaaS-based application model. Issues such as identity and access management need to be addressed before trusting third-party services to provide sensitive company data. In particular, in the case of accessibility from a mobile device, strict measures must be taken before any type of sensitive data is disclosed to the service provider.

Areas of SaaS Model Applications

The development of cloud technologies like SaaS has contributed to the creation of all kinds of applications and systems that greatly simplify and accelerate processes in different areas of our lives. Here are a few examples where SaaS technology has found its application.

  • Banking Sector

The banking and financial sector requires daily processing of large amounts of data, which is more convenient and cheaper in the cloud. In this way, banks can turn large initial capital expenditures into lower ongoing spending. In addition to high levels of data protection, fault tolerance, business continuity, and automatic backups, financial institutions can quickly develop, test, and implement new products. The development of cloud technology has simplified everyday tasks in banking.

  • Health Care

A West Monroe Partner report states that 35 percent of healthcare organizations surveyed store more than 50 percent of their data or infrastructure in the cloud. Healthcare providers are using cloud technology to improve efficiency, streamline workflows, reduce costs associated with care delivery, and provide personalization in patient care and treatment.

Cloud technology allows access to patient data collected from multiple sources, sharing information with stakeholders. It is possible to quickly create medical advice or provide a virtual physician presence in complex cases. All of this helps diagnose and prescribe treatment faster.

  •  Education Sector

The introduction of cloud technology in education has made it possible to unite teachers and students on a single educational platform. It is in the cloud that distance learning takes place in schools, universities, and courses. The software enables teachers to share notes and lesson plans, and students can do away with heavy, expensive textbooks and outlining. From the students’ point of view, access to the cloud infrastructure allows them to modernize their approach to education.

Data shows that the edtech sector is on its way to scaling further. It was valued at $76.4 billion in 2019 and is expected to grow at a CAGR of 18 percent from 2020 to 2027. Numerous edtech SaaS startups are working towards revolutionizing the way education is imparted.


The SaaS model is an indispensable tool for developing cloud solutions for businesses of all sizes. Solutions based on the SaaS model allow rapid deployment of all necessary software services in the operator’s cloud without much start-up cost. The flexibility and ease of use of this service delivery model and the ability to pay only for consumed resources make SaaS an optimal solution for small and medium-sized companies, especially when it is difficult to predict future loads on the IT subsystem. Large organizations can also benefit from the SaaS model, especially if we are talking about companies with an extensive branch infrastructure.