SaaS

Salesforce

Defining and Describing SaaS

  • SaaS (software as a service) is a way of delivering software over the internet as an ongoing service rather than as a one-time, customer-installed product. [eioe0v] [wwa9xh]
  • The term applies when a provider hosts and operates the application while customers access it remotely, commonly through a browser or API. [eioe0v] [wwa9xh] In startup and innovation work, SaaS also commonly describes the business built around that delivery model: recurring subscriptions, continuous product improvement, and provider-managed operations. [b8s04h] It does not automatically mean that every cloud-hosted product, subscription product, or web application is SaaS; the provider’s responsibility for running and updating the application is central. [eioe0v] [wwa9xh] Consultants care because the model changes product architecture, pricing, customer adoption, retention metrics, implementation work, and the economics of scaling a software company. [b8s04h]

Disambiguation

Primary sense — the innovation-consulting sense

SaaS is a software-product and business-delivery model in which a provider centrally operates an application and sells customers continuing access to it, usually through the internet and recurring payments. [eioe0v] [wwa9xh] [b8s04h]
  • In common startup usage, a SaaS company delivers software online instead of selling a perpetual license that the customer installs and maintains; monthly or annual subscriptions are typical, although usage-based pricing is also used. [b8s04h]
  • The customer generally outsources infrastructure, application operations, maintenance, and updates to the provider, accessing the product through a browser or API. [eioe0v] [wwa9xh]
  • SaaS is not synonymous with subscription software : a traditionally installed application can be sold by subscription without being provider-hosted SaaS. [eioe0v] [b8s04h]
  • SaaS is not synonymous with cloud computing as a whole. SaaS is the application layer; infrastructure as a service (IaaS) and platform as a service (PaaS) are separate cloud-service categories. [y9g68n] [83owt3]

Other senses

1. SaaS as a startup category

A SaaS startup is a company whose principal product is internet-delivered software sold through recurring, tiered, or usage-linked access. [b8s04h]
  • Founders commonly choose SaaS to replace large upfront licenses with recurring revenue and to serve many customers from a centrally operated product. [b8s04h]
  • Typical pricing structures include flat-rate, tiered, and usage-based plans; tiering allows a company to address different customer segments and willingness to pay. [b8s04h]
  • From an innovation-consulting perspective, the relevant questions are not merely whether the product is online, but whether acquisition, activation, retention, expansion, support, and infrastructure costs produce a repeatable growth model.

2. SaaS as an organizational adoption model

SaaS can also refer to an organization’s shift from owning and operating software locally to consuming it as an externally managed service. [eioe0v] [wwa9xh]
  • This shift can reduce customers’ need for upfront hardware and software infrastructure, while increasing dependence on vendor availability, security, integration, data portability, and pricing decisions. [eioe0v] [e70ijw]
  • Adoption therefore involves organizational change as well as procurement: workflows, permissions, data governance, training, and vendor-management practices may all change.
  • A hosted application supplied through an older application-service-provider arrangement may resemble SaaS, but modern SaaS generally implies a more scalable, centrally maintained service architecture. [33s5pj] [4y7xsj]
  • Also used in cloud-architecture discussions as one member of the IaaS–PaaS–SaaS service-model taxonomy; this technical sense remains relevant to innovation work because it clarifies which layer a company builds, buys, or operates. [y9g68n] [83owt3]

Etymology and Origin

  • SaaS is an abbreviation of “software as a service,” a phrase describing software delivered over a network for on-demand use rather than installed and owned outright. [eioe0v] [1t382x]
  • The acronym is commonly associated with Software as a Service: Strategic Backgrounder , an internally published industry document attributed to the Software & Information Industry Association in February 2001. [eioe0v] [1t382x]
  • The model’s predecessors include mainframe timesharing and 1990s application service providers (ASPs), which hosted applications for customers before “SaaS” became the dominant category name. [33s5pj] [wwa9xh]
  • Salesforce, founded by Marc Benioff in 1999, helped define and popularize the modern web-delivered SaaS category, while later cloud-infrastructure developments made the model easier to scale. [33s5pj] [4y7xsj]

Adjacent Vocabulary

  • Synonyms :
    • Software as a service : the unabbreviated form; identical meaning.
    • On-demand software : emphasizes access when needed rather than local installation. [eioe0v]
    • Cloud software : a broader, less precise term that may include SaaS but can also refer to software with different operating or licensing arrangements. [wwa9xh]
    • Hosted software : emphasizes provider operation, but may describe older single-customer or ASP arrangements that are not modern multi-tenant SaaS. [33s5pj] [4y7xsj]
  • Antonyms :
    • On-premises software : software installed and operated on the customer’s own infrastructure. [4y7xsj]
    • Perpetual-license software : software purchased through a one-time license rather than continuing access fees.
    • Self-hosted software : software for which the customer operates the deployment, even if the software is accessed through a network.
  • Adjacent terms : Subscription business model , Cloud computing , Platform as a service , Infrastructure as a service , Application service provider , Product led growth

Usage in Practice

  • The category is commonly described as “a software delivery model in which software and its associated data are hosted centrally and accessed using a thin-client, usually a web browser over the internet.” [eioe0v]
  • Founder-oriented descriptions frame a SaaS startup as “a company that delivers software over the internet on a subscription basis.” [b8s04h]
  • The startup distinction is often expressed as replacing a one-time license with “monthly or annual fees for ongoing access to their product.” [b8s04h]
  • SaaS pricing may be “flat-rate,” “tiered,” or “usage-based,” reflecting different ways of matching revenue to customer segments or consumption. [b8s04h]
  • In cloud architecture, SaaS is classified alongside “infrastructure as a service (IaaS)” and “platform as a service (PaaS).” [y9g68n]
  • The historical transition is often described as moving from software delivered through application service providers toward “truly delivering software not as a product, but as a service.” [4y7xsj]

Common Misuses

  • Calling any subscription software SaaS. Better term: subscription software when customers install and operate the application themselves; recurring billing alone does not establish SaaS. [eioe0v] [b8s04h]
  • Calling any web application SaaS. Better term: web application when the description says nothing about provider-managed operations, updates, or service delivery.
  • Calling a cloud provider or hosting layer SaaS. Better term: IaaS or PaaS when the company supplies infrastructure or developer tooling rather than a finished end-user application. [y9g68n] [83owt3]
  • Calling a one-customer hosted deployment SaaS without qualification. Better term: hosted software or application service provider when the architecture and operating model resemble older ASP arrangements rather than a centrally maintained, scalable SaaS product. [33s5pj] [4y7xsj]

Sources