What is Software as a Service (SaaS)?

SaaS, or Software as a Service, describes the processes of using software online through cloud computing instead of purchasing and installing it on a local computer hard drive. SaaS products can be broken up into consumer and enterprise segments. Common SaaS applications for consumer use are Gmail or Google Docs, both free of charge and accessible through a web browser. Some popular SaaS applications for enterprise use are Netsuite and Salesforce.com, which help companies more efficiently run segments of their business.

SaaS providers use multi-tenancy to keep down the cost of infrastructure. This means that multiple users can have access to an application, instead of each owning the software separately. The infrastructure is centrally maintained by the SaaS provider. This cuts costs for the service provider, allowing them to charge a relatively low monthly fee, as opposed to a large up-front investment. SaaS programs can be used on applications created via PaaS, which are used on top of IaaS.

There are many advantages of SaaS applications including software updates without a need for new purchases or hardware installation. Included with this benefit is compatibility: when you are collaborating with co-workers, you will no longer need to worry if you both have the same version of the software. This allows customer support to more easily troubleshoot problems. Another benefit is cost savings: instead of purchasing costly software like Microsoft Office, Storage as a Service gives you the ability to rent the software and host it through your web browser for a small monthly fee. Microsoft Office 365 allows you to access email, calendars, web conferencing, file sharing, and traditional office programs like Word and PowerPoint all via the Internet. In addition to the cost savings, this also allows for flexibility in accessing the application, allowing it to be retrieved on any web browser.

On an enterprise level, SaaS streamlined many segments of business. In the past, enterprise software installation could last for days or weeks and cost thousands of dollars in installations and IT hours. Without that investment in effort and money, finance department employees worked ineffectively with out-of-date software. SaaS applications like Netsuite allow companies to keep track of and analyze finances, manage inventory, and streamline their supply chain. This enables employees to operate their business with the most updated software programs without tying up the IT department’s hours.

Customer Relationship Management, or CRM, is a strategy used by businesses to help employees accomplish successful interactions with their clients and customers. CRM extends throughout many facets of a company, from marketing to sales to customer support. One of the most popular SaaS CRM solutions is Salesforce.com’s application, which is used by clients like Starbucks, NBC, and Dell. Salesforce.com’s CRM includes tools such as product tracking, call scripting, and customized apps.

History & Trending

Software as a Service was born out of a need for software to be easily installed and cost-effectively upgraded. The SaaS market is the largest and fastest growing segment of cloud computing, and it is expected to grow continually into the future. According to Gartner, the global SaaS market reached €7.5 billion ($10 billion) in 2010 and was projected to reach €9.1 billion ($12.1 billion) in 2011, a growth of 20.7%. The US accounted for €5.8 billion ($7.7 billion) in SaaS revenue, while European countries accounted for around €2.1 billion ($2.8 billion) in 2011. Predictions for the future global market size of SaaS vary from €30.3 billion ($40 billion) by 2014 (IDC) to €16.2 billion ($21.3 billion) by 2015, (Gartner), but growth is certain.

Low initial investment, flexibility, and reliability make SaaS an attractive option for businesses. According to IDC, it is estimated that by 2015 about 24% of all new software purchased by businesses will be of service-enabled software with SaaS delivery being 13.1% of worldwide software spending. Currently, CRM and financial applications dominate the SaaS business market. Forrester is predicts that in 2012 SaaS applications for product life-cycle management, business intelligence, and supply chain management will make a strong impact. A study conducted by Triple Tree and the Software and Information Industry Association found that SaaS deployments are 50% to 90% faster and five to ten times less expensive than installed software. Research from Gartner in 2011 predicted that the CRM segment of SaaS alone is to exceed €3 billion ($4 billion) in total revenue by 2014.