Software-as-a-service is a way of consuming software applications over the internet at a regular monthly or yearly cost.
It is commonly abbreviated to SaaS or referred to as “cloud-based”, “hosted” or “on-demand” software.
Under a software-as-a-service model, an application is centrally hosted in one or more data centres. Users do not have to download anything. They simply open a web browser, go to a website and log in. It is available from any computer.
Today, almost any software product imaginable can be consumed as a service.
Common software-as-a-service applications used by businesses worldwide include:
- Desktop productivity software (such as word processing and spreadsheets)
- Anti-virus and security software
- Customer relationship management (CRM)
- Enterprise resource management (ERP)
- Human resource management
- Messaging and collaboration applications
Software-as-a-service offers a number of advantages over buying boxed versions of software in a store.
The main advantage is that buying software outright is a capital expense (CapEx) for a business, whereas consuming software-as-a-service is an operating expense (OpEx).
This is important because businesses are under pressure to do more with less. Software-as-a-service allows them to spend less upfront while immediately getting the full benefits of the software.
Another advantage is that software-as-a-service users always stay updated on the latest version of a software application with access to the latest features. There is no chance of the software you use becoming outdated.
Software-as-a-service users generally pay a regular subscription fee to access the service. However, some software-as-a-service applications are made available under a “freemium” model, where a limited version is provided free and users can subscribe to access more “premium” functions.
Under software-as-a-service, user data is stored by the service provider, not on the user’s premises.
Data location has caused some concerns for some highly-regulated industries such as healthcare and finance. Service providers have alleviated those concerns by setting up in-country hosts for their applications in many locations worldwide, which also keeps the data local to that country.
Software-as-a-service (and cloud computing services generally) has also given rise to a trend called ‘shadow IT’ or ‘stealth IT’. Staff in a business may begin using software-as-a-service to gain access to new line-of-business technology, without asking permission from management or IT. Though it may cause security and software compliance challenges, shadow IT also offers a way for business units to innovate cheaply and develop ideas to the point of a formal proposal.