Characteristics, Benefits & Risks of Software as a Service

7 Minutes time to read

Given the extensive growth of cloud accessibility, traditional software development may now seem more painful than solutions brought by computing power and centralized hosting services. And one of them is SaaS development, which allows engineers to roll out applications more effortlessly, faster, and less cost-consuming. Thanks to that flexibility, nearly every type of core business function can be available via the web. If you want to learn the concept of SaaS more precisely or explore SaaS features and benefits, this is the place to get answers to your questions. 

History: early SaaS model

Application centralized hosting started back in the 1960s. Mainframe computer providers like IBM then conducted utility computing services, offering computing power and database storage primarily to banks and large organizations. 

With the expansion of the Internet during the 1990s, a new class of centralized computing appeared, shifting the focus on small businesses and empowering them with specialized business app hosting and management supply. Application service providers (ASP) significantly reduced costs through central administration, increasing their value. Thus, the concept of cloud computing began growing and later initiated the development of companies dedicated to cloud software creation. The most vivid example is Salesforce, which began offering traditional enterprise solutions, such as customer relationship management (CRM), through an early SaaS model. 

What is SaaS

Essentially, software as a service (SaaS) is a specific licensing and delivery model, implying the software is accredited on a subscription basis and accessible via the Internet (centrally hosted). Such a model is also known as web-based or web-hosted software. 

Whatever the name, its working principle is always the same. SaaS applications run on a SaaS provider’s servers. Usually, a software provider will host the application or any related data either using its own servers, databases, and other networking resources or employing an ISV(Independent Service Vendor) that will contract a cloud provider to host the application in a particular data center. 

Instead of downloading the software on your PC or business network to run or manage it, the provider administers access to the application, including monitoring its availability, performance, and security, via the web browser. Users simply pay a subscription fee to gain access to it. Therefore, applications delivered by this model do not require a painful installation process or maintenance, which makes SaaS so prominent for most businesses. And that is just one of the other numerous benefits of a SaaS solution. 

SaaS architecture

The first and foremost SaaS competitive advantage is the architecture itself. Typically, SaaS adheres to a multitenant approach. It means that all users and applications share one common infrastructure with a single version and configuration across all customers and one code base that is centrally maintained. That allows for faster updates and bug fixes, and easier changes deployment since engineers can innovate for all customers by administering the one shared instance rather than handling several of them at once. It guarantees a bigger pool of resources to be available to a larger public without compromising any essential cloud functions like security, speed, or privacy.

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Benefits of using SaaS

To continue with the SaaS model advantages, we’ve compiled a list of the most significant points why choose SaaS applications over other models: 

  • Cost-effectiveness

Because of removing the need for installation, provision, and support, SaaS eliminates the expense of hardware acquisition, which can be one of the most prominent SaaS benefits for business on a budget. Furthermore, the model operates on a subscription basis, meaning customers will have to pay an established fee to use the application, which allows business owners to predict their finances more precisely and save costs. 

  • High accessibility

Another strong profit of SaaS applications is the ability to run on whatever operating system via an internet browser, and your applications will remain accessible to all users. Thus, you don’t need to worry about other software to make your product compatible with any internet-enabled digital devices. Perhaps more critical, applications can be used on mobile devices like tablets ensuring accessibility in many different circumstances and locations.

  • Effortless scalability

If you need to add more users to your service or want to reduce them, it’s an easy step to do with SaaS. You simply adjust your billing plan accordingly, and that’s it.

  • Reliable saving and storage

With SaaS, the data is saved in the cloud, which does not require investing in backups such as storage or other disaster recovery plans to handle any hardware collapses. Also, thanks to that, users can switch between devices without risking losing previous work and data progress simply by logging into a single account regardless of the device. 

  • Powerful analytics and data 

SaaS applications run through a centralized platform, so it becomes much easier to capture data and conduct analytics. Vendors who use SaaS can access reporting and intelligence tools, helping them streamline the workflow and get valuable insights. It can be one of the massive advantages of SaaS in the enterprise since data analysis takes a prominent place here.  

  • Customization

In case you have other business applications and want everything to be consistent and holistic, SaaS offers customization, especially across applications from one software provider. Users can customize the UI in order to adjust the look and feel of the program according to their needs. Also, contemporary web-based software allows businesses to switch off and on several business features to make their products even more personalized.

SaaS risks and challenges

Once you know the SaaS solution benefits, it’s high time to examine its dark side. So, what are the risks associated with software as a service? Probably the major one is the need for an internet connection to function. However, with the increasingly wide availability of high-speed networks, that is no longer an issue. Still, there are some other crucial challenges with SaaS model: 

  • Security issues

Since data is stored on external servers, businesses must rely on outside vendors to provide software safely. In other words, they have to ensure that it is secured and the data can not be accessed by unauthorized parties. The security risks associated with SaaS can be a real obstacle. Moreover, it might cover multiple concerns, including encryption, security monitoring, costs on external tools to offset the SaaS security challenges, and so on.

  • Lack of control

Whether the provider adopts a new version or makes some changes, this will roll out to all of its customers, regardless of the users’ preferences and needs. Some of the novelties can require extra time for training, provided the changes are significant. Also, it means customers can’t control versioning to be ready to adopt a renewed version quickly. 

  • Difficulty in switching providers

To switch vendors, customers will have to migrate massive amounts of data. And if the vendor uses some proprietary technologies, that can only complicate the migrations between different cloud providers. 

  • Low speed

Apart from SaaS security risks that can affect your opinion, there are also no less sad speed performance issues. The slow internet connection can spoil everything, especially if the cloud servers are accessed from far distances. And sometimes, the remote nature of software as a service features can be damaging rather than favored.


SaaS providers and best examples

Despite all these SaaS challenges, the SaaS market involves a variety of software providers and products and only continues to grow. The scope ranges from small industry players and single-product vendors to real industry giants. One of them is Google, with its online word processor, Google Docs. To work with it, users need to log in on any web browser for instant access. This SaaS product allows writing, editing, and even collaboration in real-time wherever users’ locations are. 


Another great case is Dropbox. It is cloud storage where businesses can store, share, and collaborate on different types of files and data, including visuals, photos, and videos. 


Those not acquainted with the SaaS concept might be surprised, but Netflix is also a SaaS company that sells software to watch licensed videos on demand. It uses a subscription model, allowing users to choose a pricing plan with a fixed sum of money paid monthly or annually.


All in all, the SaaS market is everything in one place, and here you can find applications for fundamental business processes like management, human resource management, billing, and collaboration. If you seek enterprise solutions, you can use vertical SaaS products that are specifically created for one particular industry or narrow market niche, such as commerce or insurance. Horizontal SaaS models target a broad cycle of customers, not regarding their core industries. The most prominent examples of this type of SaaS are SalesForce and HubSpot.


SaaS vs. PaaS vs. IaaS 

To better understand the essence of SaaS, it’s critical to explore it within general settings and compare it to other models. 

Basically, SaaS comprises one of the three main as-a-service products, along with IaaS and PaaS. All of them involve cloud providers to deliver their hosted data center sources to users over the web. Where the product differs is in the features and functionalities they offer. 

SaaS is considered complete and fully managed products that deliver applications by subscription. SaaS vendors handle maintenance, updates, support, and other aspects of administering the software. 

When comparing SaaS vs. PaaS (platform-as-a-service), PaaS provides a software development platform or a framework of resources for developers. This web-hosted platform allows engineers to develop customized applications and concentrate on software creation without focusing on storage or infrastructure issues since PaaS vendors are responsible for that as well as for the provision of the related tools. 

Finally, IaaS (infrastructure-as-a-service) is more fit for companies that want to outsource their data center and other resources to a cloud provider. This type of product usually hosts infrastructure elements, including servers, networking hardware, or storage that are available for purchase. Still, IaaS services require self-maintenance, meaning IaaS users have to manage their data use and applications by themselves. 

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SaaS pricing models

Whether you are ready to work with SaaS, there is another thing you should know despite software as a service advantages and disadvantages. Compared to a traditional software license, using SaaS products can be more cost-effective since it doesn’t require setup and installation. However, software-as-a-service pricing plans are versatile and all different. So, if you want to effectively organize your budget and not fail at the initial stage, you should discover what pricing programs are better for you.

Generally, software-as-a-service vendors adhere to the following models:

  • free or ad-based 

The service may be free for usage, but SaaS providers would generate profit through selling space for advertisements. This type of pricing usually presupposes an upgrade to a paid version that won’t show tiresome ads. 

  • flat-rate pricing

Here, users should pay a fixed subscription fee monthly or annually to get access to the service.

  • per-user pricing

The pricing is determined by how many users will be accessing the service. Also, there can be a fixed fee for every customer. 

  • storage fees

Although users may access the service for free, they will still need to pay for storage if they want to continue working with the SaaS product after the gratuitous limit is over. 

  • feature-based pricing

In this pricing model, fees are usually determined by the number of features the user employs. Thus, incomplete versions with limited features would cost less than the maximum supply of functionalities. 

  • freemium pricing

As the name implies, freemium is a specific pricing model in which the service provider offers basic entry-level features for free while charging a premium for any additional advanced functionalities. However, users may face restrictions in order to upsell a paid version. 

On a final note

All in all, the benefits of software as a service model are massive for both vendors and users. While some may prefer traditional cloud management services and software, for the majority of small businesses, SaaS provides huge opportunities that can help them develop and expand with fewer efforts and costs. And who doesn’t want ready-made solutions? 

Furthermore, organizations now seek ways to develop SaaS integration platforms that would manage the process of connecting SaaS features and solutions to other cloud-based applications or systems into larger units. That signifies software-as-a-service will continue to grow, serving an even better experience for those who will work with it. 

If you still have questions about SaaS or want more insights about software as a service risks, feel free to contact us. We will provide you with all the necessary information to satisfy your interest. 

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