According to recent research, the global Software-as-a-Service (SaaS) market is expected to reach upwards of $95 billion by 2022. From accounting and finance tools to customer service and marketing, businesses of all shapes and sizes are leveraging SaaS more than ever to increase productivity, efficiency, and collaboration.
And while most people are familiar with SaaS on a surface level as technology tools that can be used from any device in any location, there are actually a variety of reasons that make the SaaS model so attractive for organizations across all industries. This software as a service framework is superior to the traditional on-premise model due to the flexibility, scalability, pricing model, and easy integration with other systems and apps.
In case you’re not currently aware of the key points that make the software as a service framework so effective, read on to learn everything you need to know about SaaS and why you should consider adopting software as a service tools for your business.
Need-to-know Saas Basics
Before diving into the specific elements of the software as a service framework, let’s take a look at the basics of SaaS and why adoption is still increasing at a rapid pace. Broadly, SaaS is defined as a software licensing and delivery model where software is licensed on a subscription basis and centrally hosted by a third-party. Tools and services like Salesforce (CRM), Google Drive (productivity), and Dropbox (file storage) are great examples of some of the most popular and widely used SaaS offerings on the market today.
SaaS tools are typically accessed via a web browser, with a unique login credential being provided to each licensed user. This makes it easy for individuals within an organization to utilize productivity software from virtually anywhere, using a multitude of devices. The SaaS model can be (and is) applied to just about any variety of business and/or productivity software, including messaging, human resources, and enterprise resource planning (ERP). Companies that use SaaS tools typically pay the service provider on a subscription basis, with the vendor being responsible for the technology infrastructure and overhead, as well as continuous R&D, upgrades, and additional feature sets.
Now that you’re familiar with how SaaS functions on a high level, let’s dive into specific elements of what the cloud-based framework entails.
One of the core components of the SaaS framework, as opposed to the traditional on-premise application model, is that it’s highly scalable in terms of data and users. Think about the “old school” model where you’d purchase and download software (Microsoft Office, for example) to a particular PC or laptop. Once that process is complete, the software application will only be available for use on that specific machine by the person who uses it. Adding more users requires and more devices require additional purchases and installations.
The SaaS framework, on the other hand, scales quickly and easily as businesses grow. If a company is using a cloud-based graphic design tool like Adobe Creative Suite, for instance, they can simply add more licensed users as they hire more graphic designers that need to use the tool. Most SaaS applications have no restrictions on the number of users that can be provisioned to access the system, and adding users is simply a matter of purchasing a license with unique login credentials.
This inherent scalability is what makes the SaaS model so attractive to companies and organizations. Third-party vendors are also responsible for all data storage and processing, also eliminating the necessity of purchasing additional servers required to use applications as the number of users and customers grows over time. Most SaaS vendors and partners work with their customers on a consultative basis, mapping out each company’s growth trajectory and potential before purchasing their first license and formulating a plan of system configuration and user growth in alignment with key business objectives.
2. Multi-tenant model
A second core element to the SaaS framework is what’s referred to as a “Multi-tenant” model of software architecture. The basic principle of a multi-tenant model is where a single instance of a software application is used to serve multiple users, or “tenants.” In the traditional model, as mentioned, a single download installation (i.e. instance) can only be used to serve one user, on one machine. Think of it in terms of how modern electricity functions, where we all get our power from a single source (the electric company), rather than each home and office having their own generator.
One of the primary benefits of the multi-tenant model is that overall software maintenance and development costs are shared, making the application more economical for the user. Take the case of software updates, for example. Under the old model, each user might have to go to a website, download a patch, and then individually update on his/her machine. Under the SaaS framework, the provider makes the updates from a central instance/location and then shares it with all of its “tenants.” This also helps companies use internal IT resources more effectively and efficiently, as they’re not burdened with tedious tasks like updates and patches. And most SaaS providers have their own development and R&D teams, meaning that enhancements and feature sets around being worked on year-round based on common customer needs and suggestions.
Finally, the multi-tenant model is extremely effective when it comes to making organization-wide customizations to any specific tool. If a company is using a SaaS CRM tool like Salesforce and wants each salesperson’s dashboard to show certain sales metrics on an ongoing basis, the administrator can do so on a global basis, as opposed to each user having to change their settings individually.
3. Dynamic pricing
Dynamic pricing is one of the most convincing aspects of the SaaS framework over traditional delivery models, as it gives organizations a greater amount of flexibility as it relates to their ongoing IT spend. Different SaaS vendors and providers have their own spin on the type of dynamic pricing they provide to customers, but the basic principle is that organizations purchase SaaS subscriptions based on features, functionality, users, and data capabilities specific to their business. Therefore, companies who use SaaS tools aren’t paying for features or aspects of the software that aren’t needed.
A small business using a SaaS-based email marketing tool, for example, might purchase a package that has a limit of 2,000 emails per month. They might also specify that advanced workflows are required at an additional cost. The SaaS provider will then create a custom, dynamic price structure to meet those needs, and eliminate charges for features and functionality that the company doesn’t require. And as time goes on, companies can add, subtract, or alter features and functionality as their business needs change.
This dynamic pricing model is a far cry from traditional on-premise software applications, which are typically sold in rigid packages at only two or three price points. The result is that all too often, companies purchase a package that is well above their needs (wasteful spending, effectively) or buying software that underserves them due to budgetary constraints. In certain instances, SaaS vendors may also offer usage-based dynamic pricing, so that you’ll only be charged each month for how often you use the service (number of marketing emails sent, for example).
4. Easy access & integration
One of the major downsides to the traditional on-premise models is the lack of accessibility as opposed to the SaaS framework. Users can only access the application on the machine or device on which it’s been installed, also making integrating with other cloud-based tools complex, time-consuming, and expensive. As we touched on earlier, SaaS applications are typically accessed on a bring-your-own-device (BYOD) basis. Meaning, as long as the device has a web browser and/or native application, users can access the tool simply by visiting the URL and using their unique login credentials. Access to data and services from any networked device also makes it easier for companies to manage things like permission privileges, monitor application usage, and ensure data integrity.
SaaS accessibility doesn’t just refer to the ability to log in from any device in any location, it also encompasses the ease and usability of the application’s interface. Software applications that score high on user accessibility have typically been designed to be intuitive, easy to navigate, and adaptive to various devices and operating systems. A SaaS CRM tool like Hubspot, for instance, rates high on accessibility because the company has focused a large number of resources on making it easy to navigate whether the user is accessing the application via PC, laptop, tablet, or smartphone. Most SaaS applications like Hubspot not only adapt to device type and screen size but also according to the operating system (iOS or Android, for example).
SaaS applications are also much easier to integrate with other systems and applications than on-premise alternatives, with varying degrees of difficulty. From the start, most SaaS vendors work with customers to determine what other applications will need to be integrated so that once the system is up and running, data transactions and workflows between systems and applications are seamless and automated. And depending on the tool, integrating various SaaS applications to one another can be just as easy as a few clicks in the setup or admin screen. An open application programming interface (API) is what facilitates this ease of integration, and is an indispensable component to the SaaS framework.
5. Data protection & security
One of the major misconceptions about SaaS applications is that data stored in the cloud is somehow less secure than if it was stored in a local, on-premise server. However, recent data shows that on-premise user environments actually experience more incidents of cyber attacks than cloud environments do. On-premise environments also suffer significantly more brute force attacks as compared to their SaaS counterparts. Today, it’s apparent that much of the security-related paranoia surrounding SaaS and cloud-based applications is due largely to the fact that the approach itself “feels” insecure to uneducated consumers simply due to the fact that their data is stored elsewhere.
However, quite the opposite is true, as most SaaS partners and vendors take extreme precautions – and employ teams of cybersecurity experts – to safeguard critical data and systems access. In fact, SaaS providers that conduct any data hosting, colocation, or processing is subject to what’s called the Service Organization Control (SOC) 2 reporting standard. A SOC 2 report is designed to ensure that any data which is transmitted, stored, maintained, processed, or disposed of by a cloud or SaaS provider is kept secure and confidential. Not to mention the fact that should SaaS provider data become compromised, the vendor will face a significant ding to their reputational. Therefore, both compliance and economic incentives are already in place that encourages SaaS providers to take data protection very seriously.
That being said, it’s still wise to work with a certified cybersecurity partner to ensure you (and your SaaS providers) are taking adequate measures to prevent data breaches. This includes cloud security best practices such as vulnerability scanning, compliance management, encryption in the cloud, and developing an incident response plan in tandem with your cloud partner.
The adoption of cloud-based SaaS applications isn’t slowing down anytime soon, and for good reason. The software as a service framework provides organizations the flexibility and scalability to adjust to business growth and headcount needs much more so than traditional software models. Moreover, you’re effectively outsourcing resource consuming activities like R&D and feature-set updates to your cloud provider, letting you focus more energy on using tools to achieve your business objectives.
The SaaS framework is also attractive because dynamic pricing models allow companies to pay only for what’s useful, and better predict their IT spending over time. Ease of access from any device, as well as open APIs that allow for seamless integration of other apps also make the SaaS model appealing to organizations with a variety of tools and complex processes. And finally, data stored in the cloud via SaaS providers are often more secure than information secured on-premise, provided that companies work with a trusted cybersecurity partner to ensure SOC 2 compliance at all times.