If you've ever used online accounting software, checked your work email through a browser or managed a project using an online tool, you've probably used SaaS. So what is SaaS, exactly?
SaaS stands for software as a service, and it's one of the most common ways businesses access software. Instead of buying a programme and installing it on your computer, you pay to use software that's hosted online. It's an easy way to get the tools your business needs without worrying about installing updates or maintaining servers.
Here's how SaaS works, why businesses use it and what to consider before signing up.
What is SaaS, in plain language?
Software as a service (SaaS) is software that you access over the internet instead of installing and running it on your own computer or servers. The software provider hosts and maintains the programme, and you pay a subscription fee to use it.
For example, instead of buying accounting software on a disc and installing it on your office computer, you can subscribe to an online accounting service. You log in through your web browser, enter your information and use the software just like you would a traditional programme.
The difference is that the provider takes care of the technical side, including the servers, software updates and maintenance.
The US National Institute of Standards and Technology (NIST) includes SaaS in its official definition of cloud computing. It's a type of cloud-based software because the programme runs on the provider's cloud infrastructure rather than your own equipment.
How SaaS works
When you use SaaS, the software runs on servers managed by the provider. You connect to those servers over the internet, usually through a web browser.
Many SaaS platforms use something called multi-tenant architecture. This means multiple businesses use the same underlying software system, but each business's information is kept separate.
Think of it like an office building. Several companies share the same building and its maintenance services, but each has its own private office space. SaaS works in a similar way. The provider maintains the software while customers use their own accounts and data.
This shared setup helps keep costs down because the provider doesn't need to build and maintain a completely separate system for every customer.
The provider also handles software updates, security patches, server maintenance and backups. You don't need to install new versions or hire someone to maintain the software. Updates are generally rolled out by the provider, although the timing and features may vary by account or subscription.
How you access SaaS and how subscriptions work
Most SaaS programmes are easy to access. You open a web browser, go to the provider's website and log in to your account. Many providers also offer mobile apps and desktop programmes that connect to the same online service.
This means you can often start working on your office computer and pick up where you left off on your phone or laptop.
Most SaaS companies charge a recurring subscription fee, although the way they calculate that fee can vary.
- Per-user pricing: You pay a monthly or annual fee for each employee who uses the software. For example, a business with ten users pays for ten subscriptions.
- Tiered plans: Providers offer different subscription levels with more features, storage or capabilities as the price increases.
- Usage-based pricing: You pay based on how much you use the service. This might include the amount of data stored, transactions processed or other activities.
Some providers offer monthly subscriptions that you can cancel with relatively little notice. Others require an annual commitment, sometimes in exchange for a discount.
Free trials are also common. Before subscribing, take advantage of the trial to see how the software handles the tasks your team needs to complete.
SaaS examples and business use cases
You probably already use several SaaS programmes without thinking much about how they work.
Businesses commonly use SaaS for:
- Email and office tools: Email, word processing, spreadsheets, document storage and shared calendars.
- Accounting and invoicing: Tracking expenses, sending invoices, managing payments and preparing financial reports.
- Customer relationship management (CRM): Keeping track of customers, sales leads, communications and follow-ups.
- Project management: Assigning tasks, setting deadlines, tracking progress and sharing updates.
- Marketing: Scheduling social media posts, managing email campaigns and tracking website performance.
- Communication: Video meetings, instant messaging and team collaboration.
For example, say you own a small retail business. Years ago, you might have purchased accounting software, installed it on one office computer and saved backups to an external drive. If you needed help with the programme, you might have had to call an IT consultant.
With SaaS, you can subscribe to an online accounting platform and access your information from almost anywhere. You can send an invoice from your phone, check expenses from home and give your accountant access without having to share a computer.
Everything stays connected through the same online service.
The benefits of SaaS software
There are several reasons businesses choose SaaS over traditional software. Here are some of the biggest benefits.
Accessibility
One of the most convenient things about SaaS is being able to use your software from different locations and devices. Employees can access the same tools whether they're working in the office, at home or while travelling. In most cases, all they need is an internet connection and their login information.
This can be especially helpful for businesses with remote employees, multiple locations or teams that spend a lot of time away from the office.
Maintenance handled for you
With traditional software, someone needs to install updates, fix technical problems and make sure the programme stays compatible with your systems. SaaS providers take care of most of that work. They maintain the servers, release software updates and apply security patches.
This can save your business time and reduce the amount of IT work your employees need to handle. It's particularly useful for smaller businesses that don't have their own IT department. You may still need to manage employee accounts, permissions and security settings, but the provider handles most of the work needed to keep the software running.
Scalability
SaaS makes it relatively easy to add or remove users as your business changes. For example, if your company grows from five employees to fifty, you can usually add more accounts through your subscription. You don't need to buy and install new servers just to give everyone access.
Some providers also let you reduce the number of users during quieter periods, although this depends on your contract. This ability to increase or decrease resources as needed is one of the characteristics of cloud computing identified by NIST.
Predictable, lower upfront costs
Traditional business software can come with substantial upfront expenses. You might need to purchase licences, buy equipment, hire someone for installation and pay for ongoing maintenance.
With SaaS, you usually pay a monthly or annual subscription instead. This makes it easier for small businesses to get started without spending a large amount of money upfront. It can also make budgeting simpler because you know what your regular subscription costs will be.
Keep in mind that subscription prices can change, and additional features or users may increase your bill.
Things to think about before you commit
SaaS has plenty of advantages, but there are also some drawbacks. Before choosing a service, think about how it will affect your business and what problems you might run into.
Internet access is essential
Because SaaS runs online, you generally need an internet connection to use it. If your internet goes down, you may lose access to important business tools until the connection comes back.
Some SaaS programmes have offline features, but many have limited functionality without internet access. If your business relies heavily on online software, consider having a backup internet connection.
It's also worth checking whether the provider offers any offline capabilities before signing up.
Data handling and trust
When you use SaaS, your business information is stored on servers managed by another company. That means you need to trust the provider to protect your data.
Before signing up, find out what security measures the company uses, how often it backs up information and whether it follows any security or privacy standards relevant to your business.
You should also check where your data is stored and what happens to it if you cancel your subscription. For example, will you have time to download your records? Will the provider delete your information after your account closes? These details matter, especially if your business handles sensitive customer or financial information.
Integrations
Most businesses use more than one type of software. You might have separate programmes for accounting, sales, scheduling and customer service. Ideally, your SaaS tools should work together so employees don't have to enter the same information into multiple systems.
Many providers offer built-in integrations that connect popular business programmes. Others use an application programming interface (API), which allows different software systems to exchange information.
Before choosing a SaaS product, check whether it connects with the tools you already use. If possible, test those connections during the free trial.
Recurring costs add up
A monthly subscription can look affordable until you start adding more employees, features and services. For example, software that costs £20 per user per month would cost £200 per month for a team of ten. That's £2,400 per year for just one programme.
If your business uses several SaaS products, the costs can add up quickly. Providers may also increase subscription prices over time, and some features may require an upgrade to a more expensive plan.
Before committing, calculate what the software will cost over three years. Include subscription fees, additional users, optional features and any setup or support charges.
Less control
With SaaS, the provider controls the underlying software. You can usually adjust settings, create accounts and customise certain features, but you can't change everything about how the programme works.
You also have limited control over when the provider releases updates or changes features. This can be frustrating if your business has unusual processes or needs highly customised software.
Before subscribing, make sure the programme can handle your existing workflows without requiring major changes to how your team operates.
SaaS vs on-premise software
The main alternative to SaaS is on-premise software. This is software installed on computers or servers that your business owns or manages.
Here's how the two compare.
| Feature | SaaS | On-premise software |
|---|---|---|
| Where it runs | On the provider's servers | On your business's computers or servers |
| Upfront cost | Usually lower, with subscription fees | Often higher due to licences, equipment and setup |
| Maintenance | Mostly handled by the provider | Handled by your IT team or consultants |
| Access | Generally available anywhere with internet | Usually through your office network unless remote access is configured |
| Scaling | Often as simple as adding users or upgrading a plan | May require additional equipment or licences |
| Control | Limited to the provider's available settings and features | Greater control over software, data and customisation |
| Long-term cost | Ongoing fees can add up over time | May cost less over time, depending on maintenance and equipment expenses |
Neither option is the best choice for every business.
On-premise software can make sense for companies that need extensive customisation, want greater control over their systems or have specific security and regulatory requirements.
SaaS is often a more practical choice for small and medium-sized businesses that want to keep upfront costs down and avoid managing their own servers.
What to look for when evaluating a SaaS product
Choosing SaaS software involves more than comparing subscription prices. You also need to make sure the programme works for your business and won't create more problems than it solves.
Here are eight things to check before committing.
- Workflow fit: Does the software handle the tasks your employees need to complete? Have team members test it using their normal daily work instead of relying on a sales demonstration.
- Security: Look for information about how the provider protects data, manages backups and handles security incidents. Check for certifications that matter to your industry.
- Data export: Make sure you can download your information in a usable format if you decide to leave. Try exporting some data during the free trial to see how the process works.
- Integrations: Check whether the software connects with your accounting system, CRM, email platform and other important tools. Don't assume an integration exists just because both products are popular.
- True cost: Calculate the subscription price for your entire team, including additional features and other charges. Look at the annual cost, even if you plan to pay monthly.
- Contract terms: Read the cancellation policy, renewal conditions and any clauses about price increases. Some subscriptions automatically renew unless you cancel within a specific period.
- Support quality: Find out how you can contact customer support and when help is available. Check whether phone support, live chat or faster response times cost extra.
- Reliability record: Look at the provider's history of service outages and how it communicates when something goes wrong. Some companies publish uptime reports and service status pages.
It also helps to involve the employees who will actually use the software. A programme might look impressive in a demonstration but be frustrating to work with every day.
Ask your team to test it with real tasks, check how easy it is to learn and identify any missing features before signing a long-term contract.
The bottom line
SaaS makes it easier for businesses to access software without buying expensive equipment, installing programmes on every computer or managing their own servers. You pay a subscription, log in and use the tools you need.
For many small and medium-sized businesses, the lower upfront costs, automatic updates and ability to work from different locations make SaaS a practical option.
Just make sure you know what you're signing up for. Compare the long-term costs, check how the provider handles your data and test the software with your team's everyday tasks. A little research before subscribing can save you a lot of frustration later.
Sources
- https://csrc.nist.gov/glossary/term/software_as_a_service
- https://tsapps.nist.gov/publication/get_pdf.cfm?pub_id=909616
- https://ccsp.alukos.com/standards/nist-sp-800-145/
- https://www.lilachbullock.com/iaas-vs-paas-vs-saas/
- https://www.lexisnexis.co.uk/legal/glossary/software-as-a-service-saas
- https://axial-erp.com/cloud-erp-system-trends-saas-paas-and-iaas/
- https://helloexit.com/advantages-and-challenges-of-software-as-service-saas/
- https://www.outsourceaccelerator.com/articles/advantages-and-disadvantages-of-saas
