Software as a service

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Software as a service (SaaS /sæs/ [1] ) is a software licensing and delivery model in which software is licensed on a subscription basis and is centrally hosted. [2] [3] SaaS is also known as on-demand software, web-based software, or web-hosted software. [4]


SaaS is considered to be part of cloud computing, along with infrastructure as a service (IaaS), [5] platform as a service (PaaS), desktop as a service (DaaS), managed software as a service (MSaaS), mobile backend as a service (MBaaS), data center as a service (DCaaS), integration platform as a service (iPaaS), and information technology management as a service (ITMaaS). [6]

SaaS apps are typically accessed by users of a web browser (a thin client). SaaS became a common delivery model for many business applications, including office software, messaging software, payroll processing software, DBMS software, management software, CAD software, development software, gamification, virtualization, [7] accounting, collaboration, customer relationship management (CRM), management information systems (MIS), enterprise resource planning (ERP), invoicing, field service management, human resource management (HRM), talent acquisition, learning management systems, content management (CM), geographic information systems (GIS), and service desk management.

SaaS has been incorporated into the strategies of nearly all enterprise software companies. [8] [9]


Centralized hosting of business applications dates back to the 1960s. Starting in that decade, IBM and other mainframe computer providers conducted a service bureau business, often referred to as time-sharing or utility computing. Such services included offering computing power and database storage to banks and other large organizations from their worldwide data centers. [10]

The expansion of the Internet during the 1990s brought about a new class of centralized computing, called application service providers (ASP). ASPs provided businesses with the service of hosting and managing specialized business applications to reduce costs through central administration and the provider's specialization in a particular business application. Two of the largest ASPs were USI, which was headquartered in the Washington, D.C., area, and Futurelink Corporation, headquartered in Irvine, California. [11]

Software as a service essentially extends the idea of the ASP model. The term software as a service (SaaS), however, is commonly used in more specific settings:

The acronym first appeared in the goods and services description of a USPTO trademark, filed on September 23, 1985. [14] DbaaS (Database as a service) has emerged as a sub-variety of SaaS [15] and is a type of cloud database.

Microsoft referred to SaaS as "software plus services" for a few years. [16]

Distribution and pricing

The cloud (or SaaS) model has no physical need for indirect distribution because it is not distributed physically and is deployed almost instantaneously, thereby negating the need for traditional partners and middlemen. Unlike traditional software, which is conventionally sold as a perpetual license with an up-front cost (and an optional ongoing support fee), SaaS providers generally price applications using a subscription fee, most commonly a monthly fee or an annual fee. [17] Consequently, the initial setup cost for SaaS is typically lower than the equivalent enterprise software. SaaS vendors typically price their applications based on some usage parameters, such as the number of users using the application. However, because in a SaaS environment customers' data reside with the SaaS vendor, opportunities also exist to charge per transaction, event, or other units of value, such as the number of processors required. [18]

The relatively low cost for user provisioning (i.e., setting up a new customer) in a multi-tenant environment enables some SaaS vendors to offer applications using the freemium model. [18] In this model, a free service is made available with limited functionality or scope, and fees are charged for enhanced functionality or larger scope. [18]

A key driver of SaaS growth is SaaS vendors' ability to provide a price that is competitive with on-premises software. This is consistent with the traditional rationale for outsourcing IT systems, which involves applying economies of scale to application operation, i.e., an outside service provider may be able to offer better, cheaper, more reliable applications. [19]


Most SaaS providers offer a multi-tenant architecture. With this model, a single version of the application, with a single configuration (hardware, network, operating system), is used for all customers ("tenants"). To support scalability, the application can be installed on multiple machines (called horizontal scaling). In some cases, a second version of the application is set up to offer a select group of customers access to pre-release versions of the applications (e.g., a beta version) for testing purposes. This is contrasted with traditional software, where multiple physical copies of the software — each potentially of a different version, with a potentially different configuration, and often customized — are installed across various customer sites. [20]

Although an exception rather than the norm, some SaaS providers use mechanisms such as virtualization to manage a large number of customers in place of multitenancy. [21] Whether multitenancy is a necessary component of software as a service is debatable. [22]

Vertical vs horizontal SaaS

Horizontal SaaS and vertical SaaS are different models of cloud computing services. [23] Horizontal SaaS targets a broad variety of customers, generally without regard to their industry. Some popular examples of horizontal SaaS vendors are Salesforce and HubSpot. Vertical SaaS, on the other hand, refers to a niche market targeting a narrower variety of customers to meet their specific requirements. [24]


Although not all software-as-a-service applications share all the following traits, the characteristics below are common among many of them:

Accelerated feature delivery

SaaS applications are often updated more frequently than traditional software, [25] in many cases on a weekly or monthly basis. This is enabled by several factors:

Accelerated feature delivery is further enabled by agile software development methodologies. [26] Such methodologies, which evolved in the mid-1990s, provide a set of software development tools and practices to support frequent software releases.

Open integration protocols

SaaS applications predominantly offer integration protocols and application programming interfaces (APIs) that operate over a wide area network. [27] [ better source needed ] [28]

The ubiquity of SaaS applications and other Internet services and the standardization of their API technology has spawned the development of mashups, which are lightweight applications that combine data, presentation, and functionality from multiple services, creating a compound service.[ citation needed ] Mashups further differentiate SaaS applications from on-premises software as the latter cannot be easily integrated outside a company's firewall.[ original research? ]

Collaborative (and "social") functionality

Inspired by the development of the different internet networking services and the so-called web 2.0 functionality, many SaaS applications offer features that let their users collaborate and share information.

For example, many project management applications delivered in the SaaS model offer—in addition to traditional project planning functionality—collaboration features letting users comment on tasks and plans and share documents within and outside an organization. Several other SaaS applications let users vote on and offer new feature ideas.

Although some collaboration-related functionality is also integrated into on-premises software, (implicit or explicit) collaboration between users or different customers is only possible with centrally hosted software.


OpenSaaS refers to software as a service (SaaS) based on open-source code. Like SaaS applications, Open SaaS is a web-based application hosted, supported, and maintained by a service provider. While the roadmap for Open SaaS applications is defined by its community of users, upgrades and product enhancements are managed by a central provider. The term was coined in 2011 by Dries Buytaert, creator of the Drupal content management framework. [29]

Andrew Hoppin, a former Chief Information Officer for the New York State Senate, has been a vocal advocate of OpenSaaS for government, calling it "the future of government innovation." He points to WordPress and Why Unified as a successful example of an OpenSaaS software delivery model that gives customers "the best of both worlds, and more options. The fact that it is open source means that they can start building their websites by self-hosting WordPress and customizing their website to their heart’s content. Concurrently, the fact that WordPress is SaaS means that they don’t have to manage the website at all -- they can simply pay to host it." [30]

Adoption drivers

Several important changes to the software market and technology landscape have facilitated the acceptance and growth of SaaS:

Adoption challenges

Some limitations slow down the acceptance of SaaS and prohibit it from being used in some cases:

The standard model also has limitations:

Healthcare applications

According to a survey by the Healthcare Information and Management Systems Society, 83% of US IT healthcare organizations are now using cloud services, with 9.3% planning to, whereas 67% of IT healthcare organizations are currently running SaaS-based applications. [41]

Data escrow

Software as a service data escrow is the process of keeping a copy of critical software-as-a-service application data with an independent third party. Similar to source code escrow, where critical software source code is stored with an independent third party, SaaS data escrow applies the same logic to the data within a SaaS application. It allows companies to protect and ensure all the data that resides within SaaS applications, protecting against data loss. [42]

There are many and varied reasons for considering SaaS data escrow, including concerns about vendor bankruptcy, [43] [44] unplanned service outages, and potential data loss or corruption. Many businesses either ensure that they are complying with their data governance standards or try to enhance their reporting and business analytics against their SaaS data.


One notable criticism of SaaS comes from Richard Stallman of the Free Software Foundation, who refers to it as Service as a Software Substitute (SaaSS). [45] He considers the use of SaaSS to be a violation of the principles of free software. [46] According to Stallman:

With SaaSS, the users do not have even the executable file that does their computing: it is on someone else's server, where the users can't see or touch it. Thus it is impossible for them to ascertain what it really does, and impossible to change it.

See also

Related Research Articles

In telecommunication, provisioning involves the process of preparing and equipping a network to allow it to provide new services to its users. In National Security/Emergency Preparedness telecommunications services, "provisioning" equates to "initiation" and includes altering the state of an existing priority service or capability.

An application service provider (ASP) is a business providing application software generally through the Web.

NetApp, Inc. is an American hybrid cloud data services and data management company headquartered in San Jose, California. It has ranked in the Fortune 500 from 2012 to 2021. Founded in 1992 with an IPO in 1995, NetApp offers cloud data services for management of applications and data both online and physically.

A remote, online, or managed backup service, sometimes marketed as cloud backup or backup-as-a-service, is a service that provides users with a system for the backup, storage, and recovery of computer files. Online backup providers are companies that provide this type of service to end users. Such backup services are considered a form of cloud computing.

A dedicated hosting service, dedicated server, or managed hosting service is a type of Internet hosting in which the client leases an entire server not shared with anyone else. This is more flexible than shared hosting, as organizations have full control over the server(s), including choice of operating system, hardware, etc.

Software multitenancy is a software architecture in which a single instance of software runs on a server and serves multiple tenants. Systems designed in such manner are "shared". A tenant is a group of users who share a common access with specific privileges to the software instance. With a multitenant architecture, a software application is designed to provide every tenant a dedicated share of the instance - including its data, configuration, user management, tenant individual functionality and non-functional properties. Multitenancy contrasts with multi-instance architectures, where separate software instances operate on behalf of different tenants.

Appointment scheduling software or meeting scheduling tools allows businesses and professionals to manage appointments and bookings. This type of software is also known as appointment booking software and online booking software.

A virtual appliance is a pre-configured virtual machine image, ready to run on a hypervisor; virtual appliances are a subset of the broader class of software appliances. Installation of a software appliance on a virtual machine and packaging that into an image creates a virtual appliance. Like software appliances, virtual appliances are intended to eliminate the installation, configuration and maintenance costs associated with running complex stacks of software.

<span class="mw-page-title-main">On-premises software</span> Direct information article

On-premises software is installed and runs on computers on the premises of the person or organization using the software, rather than at a remote facility such as a server farm or cloud. On-premises software is sometimes referred to as "shrinkwrap" software, and off-premises software is commonly called "software as a service" ("SaaS") or "cloud computing".

Platform as a service (PaaS) or application platform as a service (aPaaS) or platform-based service is a category of cloud computing services that allows customers to provision, instantiate, run, and manage a modular bundle comprising a computing platform and one or more applications, without the complexity of building and maintaining the infrastructure typically associated with developing and launching the application(s), and to allow developers to create, develop, and package such software bundles.

<span class="mw-page-title-main">Cloud computing</span> Form of shared Internet-based computing

Cloud computing is the on-demand availability of computer system resources, especially data storage and computing power, without direct active management by the user. Large clouds often have functions distributed over multiple locations, each of which is a data center. Cloud computing relies on sharing of resources to achieve coherence and typically uses a pay-as-you-go model, which can help in reducing capital expenses but may also lead to unexpected operating expenses for users.

Plex Systems, Inc. is a software company based in Troy, Michigan. The company develops and markets the Plex Manufacturing Cloud, a software as a service (SaaS) or cloud computing ERP for manufacturing.

In computing, data as a service, or DaaS, is a term used to describe cloud-based software tools used for working with data, such as managing data in a data warehouse or analyzing data with business intelligence. It is enabled by software as a service (SaaS). Like all "as a service" (aaS) technology, DaaS builds on the concept that its data product can be provided to the user on demand, regardless of geographic or organizational separation between provider and consumer. Service-oriented architecture (SOA) and the widespread use of APIs have rendered the platform on which the data resides as irrelevant.

Customer data management (CDM) is the ways in which businesses keep track of their customer information and survey their customer base in order to obtain feedback. CDM embraces a range of software or cloud computing applications designed to give large organizations rapid and efficient access to customer data. Surveys and data can be centrally located and widely accessible within a company, as opposed to being warehoused in separate departments. CDM encompasses the collection, analysis, organizing, reporting and sharing of customer information throughout an organization. Businesses need a thorough understanding of their customers’ needs if they are to retain and increase their customer base. Efficient CDM solutions provide companies with the ability to deal instantly with customer issues and obtain immediate feedback. As a result, customer retention and customer satisfaction can show marked improvement. According to a study by Aberdeen Group inc.: "Above-average and best-in-class companies... attain greater than 20% annual improvement in retention rates, revenues, data accuracy and partner/customer satisfaction rates."

<span class="mw-page-title-main">IBM cloud computing</span> Cloud Computing

IBM cloud computing is a set of cloud computing services for business offered by the information technology company IBM. IBM Cloud includes infrastructure as a service (IaaS), software as a service (SaaS) and platform as a service (PaaS) offered through public, private and hybrid cloud delivery models, in addition to the components that make up those clouds.

A cloud database is a database that typically runs on a cloud computing platform and access to the database is provided as-a-service. There are two common deployment models: users can run databases on the cloud independently, using a virtual machine image, or they can purchase access to a database service, maintained by a cloud database provider. Of the databases available on the cloud, some are SQL-based and some use a NoSQL data model.

<span class="mw-page-title-main">Cloud computing architecture</span> Overview about the cloud computing architecture

Cloud computing architecture refers to the components and subcomponents required for cloud computing. These components typically consist of a front end platform, back end platforms, a cloud based delivery, and a network. Combined, these components make up cloud computing architecture.

<span class="mw-page-title-main">HP Cloud</span> Set of cloud computing services

HP Cloud was a set of cloud computing services available from Hewlett-Packard that offered public cloud, private cloud, hybrid cloud, managed private cloud and other cloud services. It was the combination of the previous HP Converged Cloud business unit and HP Cloud Services, an OpenStack-based public cloud. It was marketed to enterprise organizations to combine public cloud services with internal IT resources to create hybrid clouds, or a mix of private and public cloud environments, from around 2011 until 2016.

Cloud computing has become a social phenomenon used by most people every day. As with every important social phenomenon there are issues that limit its widespread adoption. In the present scenario, cloud computing is seen as a fast developing area that can instantly supply extensible services by using internet with the help of hardware and software virtualization. The biggest advantage of cloud computing is flexible lease and release of resources as per the requirement of the user. Other benefits encompass betterment in efficiency, compensating the costs in operations. It curtails down the high prices of hardware and software Although, there are numerous benefits of adopting the latest cloud technology still there are privacy issues involved in cloud computing because in the cloud at any time the data can outbreak the service provider and the information is deleted purposely. There are security issues of various kinds related with cloud computing falling into two broader categories: First, the issues related to the cloud security that the cloud providers face. Secondly, the issues related to the cloud security that the customers experience

Cloud management is the management of cloud computing products and services.


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