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What is Software as a Service in Cloud Computing?


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Praise Iwuh

April 28, 2023

What is Software as a Service in Cloud Computing?

SaaS means Software as a Service. It is a cloud-based software delivery simulation where the cloud provider creates and manages cloud application software, offers automated software updates, and makes the software accessible to its clients over the Internet on a subscription basis.

In simple terms, SaaS is a method of presenting apps on the Internet, which is then offered as a service in exchange for a monthly or annual fee.

In this article, you will learn:

  • What is Software as a Service?
  • A brief history of SaaS
  • Five major features of SaaS
  • A simple analysis of how the Cloud SaaS model works
  • Advantages and disadvantages of using SaaS for your business
  • The future of SaaS


What is Software as a Service?  

Software as a Service is a program delivery model in which a third-party provider hosts software apps and makes them accessible to customers online. Customers in this approach can use a web browser or a specific mobile app to access the software applications, and they can pay for the service via a subscription or usage-based pricing.

The main idea behind SaaS is that customers do not have to buy or manage their software or hardware due to its use of cloud computing services.

"The cloud" applies to distant web servers in different data centres that run application code and host databases.

There are three major types of these cloud computing services. This includes IaaS, PaaS, and SaaS. However, Software as a Service is focused on Application software that users can access through a web browser, an exclusive desk client, or an API compatible with a desktop or mobile operating system and hosted in the cloud.


Read about: SaaS vs IaaS vs PaaS: How to Differentiate between them.


A Brief History of SaaS  

SaaS is one of the most dynamic and stimulating technology today. Learning about its history will help you better understand how to create a successful company and SaaS product from scratch.

Here are the major highlights of the history of SaaS:

  • In the 1960s, SaaS was first called "time-sharing" or "Hosted Services."

  • Hosted services required connecting several "dumb" terminals to a computer with centralised processing power. Users could use these terminals to complete simple computing tasks while all data remained on the mainframe.

  • Many service-based companies started using a SaaS system to distribute their products in the 1990s. Some examples of these include Payroll, accounting, and client relationship management.

  • These systems used a modem and a dedicated phone line to transmit data. The apps had basic text-based user interfaces in the interim. However, the need for large transmissions was scarce because all data was small enough to send, significantly increasing efficiency.

  • In the late 1980s and 1990s, the price of computers began to drop, leading to an increase in the use of computers. However, computer users' workspaces felt cluttered because these apps took up valuable space, so they resorted to storing essential business information in a central hub. But instead of calling these systems SaaS, they called it Application Service Provider (ASP).

  • Eventually, three co-founders founded the first Cloud-based company in March 1999, Salesforce.

  • Salesforce is a provider of CRM services through cloud-based software and is still existing.  

  • The idea for Salesforce originated with Marc Benioff, and the other three business founders were Parker Harris, Dave Moellenhoff, and Frank Dominguez.

  • The concept of SaaS was introduced to tackle the challenges of its forerunner, known as the Application Service Provider (ASP) model.

  • The ASP model allowed providers to host software and offer it to customers online. However, they had to load some software on users' computers because each client needed a program copy. It was expensive and time-consuming to configure. Finally, ASP solutions usually did not provide a method to collect and aggregate data efficiently.

  • The new Software as a Service solution, Salesforce, solved the limitations of the Cloud SaaS model. There was no longer a need for program installation onsite. Additionally, it gave a method to gather, assemble, and centralise valuable application data.

  • Salesforce has used cutting-edge technologies to boost SaaS sales development since the early 2000s. The rapid transformation of this business has been facilitated by the sudden growth of numerous different technologies in the 2000s. Technologies like broadband, mobile, internet security, browsers, and APIs continue to shape the industry today.


Five Major Features of SaaS  

1. Multi-tenancy model

The Multi-tenancy model is an essential architecture model for Cloud application services, which makes it possible to provide services to numerous customers using one software deployment.

The model's name itself denotes what it is about. Each customer is called a "Tenant". Hence, multi-tenant implies multiple customers.

Each tenant can customise some parts of the application to their preference. However, these applications are often made so that each tenant's storage area is segregated by having a separate database. This leads to a different set of schemas inside a single database or the same database with discriminators.

2. High availability

High availability in Software as a Service means such applications or software must be globally accessible to people everywhere. This is because the cloud-based solution operates based on the multi-tenant feature, so it is expected to be available to numerous people.

As a result, the Software as a Service app should offer its users a high level of Service Level Agreement (SLA).

Also, applications need to be constantly accessible and must expose management and monitoring API to allow for continuous availability and health checks.

3. Security (Data and application)

Since SaaS solutions offer services to numerous customers worldwide, there must be a provision to protect the service from attacks and unauthorised entry. Information for a particular tenant must be encrypted so other tenants cannot access it.

Hence, there is a need for the provision of a strong Key Management Framework or the capacity to interface with and incorporate external Key Management.

Regarding application security, all SaaS solutions must be secured from OWASP/SAN-reported vulnerability.

SaaS applications should also have a solid identity and access management controls activated. The following additional features round up the security of the Software as a Service application: prevention of buffer overflow assaults, open integration points with CASB, strong execution of duty separation, enhanced authentication methods like passcode lockout, multiple-factor verification, recognising illegal sessions, and preventing multi-session usage.

4. Single Sign on

Single sign-on is a login feature that allows users to verify their identity and use a system. This requires a simple integration with several identity management systems.

This crucial component is typically enabled by Software-as-a-Service apps using SAML or OpenID impersonations. In addition, since SaaS apps are multi-tenant, each tenant would want to authenticate using their own identity & access management system.

Essentially, all SaaS applications must have a single page where users can enter their login information and access all of the Software as a Service apps provided to them.

5. Subscription-based billing

Pricing for SaaS apps does not include complicated license costs, upgrade costs, etc. Rather, most Software as a Service (SaaS) applications are subscription-based, allowing users to purchase them as required and cancel their subscriptions whenever they want.

SaaS applications typically use a seat-based charging model, in which the quantity bought determines the price.

It can have different pricing structures and invoicing cycles, such as monthly, quarterly, half-yearly, and annual fixed. Unfortunately, only a few present-day SaaS apps allow for usage-based billing.


Learn: The Top 11 SaaS Examples You Need to Know in 2023


A Simple Analysis of How the SaaS Model Works   

The Cloud SaaS model operates on the cloud delivery structure. It often starts with a service provider. A software vendor will host the application and associated data using its servers, databases, networking, and computing resources.

Another alternative is for an Independent Software Vendor (ISV) to hire a cloud service provider to host the application in the provider's data centre.

After this, any computer or device with a network connection can use the program, usually by accessing it from a web browser.

SaaS is closely linked to the on-demand computing and cloud service provider (ASP) software delivery models. The provider hosts the client's software and sends it to authorised end users over the Internet.

Using the software-as-a-service (SaaS) model, the provider grants users network-based access to a unique copy of an application developed with SaaS distribution in mind.

As a result, every customer's copy of the application's source code is the same, and when new features or capabilities are made available, they are distributed to every user.

For each approach, the customer's data can be kept locally, in the cloud, or both locally and in the cloud, depending on the service-level agreement (SLA).

SaaS apps also use multitenant architecture to separate customer information. The SaaS provider handles software updates, bug fixes, and other routine app upkeep, and users engage with the software via a web browser. Although most SaaS solutions are entirely functional, they occasionally use application programming interfaces (APIs) like REST or SOAP to connect to additional features.

Read: A Beginner-Friendly Guide on How to Build a SaaS App.

Advantages and Disadvantages of Using SaaS for Your Business  

SaaS Advantages

Easy Accessibility  

SaaS applications typically allow users to log in from any place and device. This provides excellent flexibility because companies can let workers work anywhere globally, and users can access their files from anywhere.


The SaaS provider manages the application's scaling up, such as expanding the database or adding more processing capacity as demand grows.


SaaS reduces overhead and expenses associated with internal IT. The only expense to a company is the application's subscription fee because the SaaS provider manages the servers and infrastructure that support it.

Simple updating  

The SaaS provider continuously updates and patches the software to simplify each customer's usage of the software.

Learn about: 15 Benefits of SaaS Software for Small Businesses

SaaS Disadvantages  

Lack of solid access control  

SaaS eliminates the need for keeping corporate assets in a secure internal network away from the public Internet. User access is determined by user identity, so access is given if someone has the correct login information. Strong identification verification is, therefore, essential.

Software Vendor lock-in  

A company might become excessively dependent on the SaaS software provider. For instance, a company that stores its entire database in the old application may be reluctant to leave the software since switching to a new one is time- and money-consuming.

 Read: What is SaaS Application Security? A beginner friendly guide.

The Future of SaaS  

As established in the history of SaaS, Software as a Service has existed since the 1960s and will develop further as technology advances.

What initially aimed to transform software purchasing and pricing is now experiencing exponential growth, with market revenue expected to hit almost $1 trillion by 2028. There are many excellent products in the software-as-a-service market, but there is still space for new initiatives.

For instance, in the future, SaaS solutions should invest in "mobile-first development," which refers to developing SaaS products first for smartphones and then adapting them for PC use. This is an important step to stay up with the times because, by 2025, only 69 million people will be using PCs, with an estimated 3.7 billion people using only smartphones.

Modern SaaS applications will also use higher levels of automation and faster data handling, such as human speech recognition.

The future of SaaS also features the adaptation of blockchain technology, providing a ground-breaking method that aims to advance data security in the modern SaaS industry.

With such technology, malicious individuals will find it challenging to access unauthorised data because blockchain technology is a distributed system with continuously updated data and records that can be backed up across multiple networks.


Read SaaS vs Cloud. What's the difference?


Software-as-a-service (SaaS) is a type of cloud computing that offers cloud applications—along with all of their supporting IT infrastructure and platforms—to end consumers via an internet browser on a subscription basis.

It is the perfect solution for large organisations, small businesses, or individuals who do not want to be in charge of purchasing or maintaining platforms, infrastructure, and on-premises software; prefer to manage costs more simply through operational expenses (OPEX) than through capital expense investments (CAPEX), and have problems that only need a minimal amount of customisation.




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