With SaaS, or “Software as a service”, rather than a company developing, maintaining, owning and supporting in-house software to manage systems such as HR or accounting, it simply rents the software from another company, which manages and hosts it on a centralised infrastructure – increasingly known as the Cloud.
SaaS has grown into a very popular way of delivering a variety of indispensable business applications ‘on demand’ – from accounting and HR software to customer relationship management systems. End users usually access SaaS applications ‘in the Cloud’ via the web using a standard web browser..
The first SaaS products for businesses
The Cloud model evolved from trends that started right back in the 1960s, when mainframe providers like IBM offered centralised services such as database storage to other big organisations. The explosion of the internet in the 1990s saw a new class of centralised computing emerge: Application Service Providers (ASP). These offered businesses centrally hosted and managed business applications, often belonging to a third party.
Software as a service (SaaS) extended this offering, replacing what were essentially hosted older-style business applications with brand new solutions based on a ‘multi-tenanted’ product architecture. With these products, instead of each customers using a dedicated application (with all of the associated overheads of maintenance, updates and upgrades), all customers share a single code base.
This makes these systems cheaper for vendors to maintain – and easier to update. The result is lower costs for customers – with automatic product updates, usually included as part of the subscription fee. The first SaaS applications included a Customer Relationship Management (CRM) product from Salesforce.com, which quickly gained popularity.
How SaaS products can be used today
The major attractions of SaaS for companies include the fact that there is no initial capital outlay for the product, and that it has the potential to cut ongoing IT support costs. All hardware and software maintenance and support is dealt with by the SaaS provider – and thanks to economies of scale, they can generally achieve this more cheaply than would be possible in-house. SaaS also enables companies to get their applications up and running quickly.
While customer relationship management (CRM) is still the largest market for SaaS, today it has grown into a common delivery model for a whole array of other business applications including:
- content management (CM)
- enterprise resource planning (ERP)
- hr software
- management information systems (MIS)
- service desk management
A SaaS HR software app, for example, can help businesses manage and streamline a whole range of HR-related activities – from employee holiday and absence management to legislative compliance and HR analytics.
SaaS products offer users the ultimate in flexibility and low cost – taking care of hardware and software implementation, upgrades, security and support, freeing up companies from all the burdens associated with installing and maintaining in-house solutions.
Many products allow businesses to respond more quickly to changing business demands because they are easier to scale up or down, and often rapidly develop new functionality. SaaS can also enable smaller companies to benefit from cheaper subscriptions, since many vendors offer short contracts so that customers are not tied in for a long period, or charge for the service based on actual usage so customers do not have to commit upfront to licences they never end up using.