SaaS
Software as a Service (SaaS) is a cloud-based delivery model where applications are used over the internet and paid by subscription – without local installation or your own servers.
SaaS has fundamentally changed how companies use and pay for software. Instead of buying expensive licences and running their own servers, users access ready-made applications in the browser and pay a monthly or annual fee. From CRM to accounting to project management – SaaS is now the dominant model for business applications.
What is SaaS?
SaaS (Software as a Service) is a delivery model where software is hosted centrally in the cloud and provided over the internet. The vendor runs and maintains the infrastructure. Users access the application via browser or app without local installation. Billing is typically subscription-based (monthly or yearly), often tiered by user count or features. SaaS is one of the three pillars of cloud computing alongside IaaS and PaaS. Well-known examples are Salesforce, Microsoft 365, Slack and Shopify.
How does SaaS work?
With SaaS the vendor runs the full stack: servers, databases, network and application. Users create an account, pick a plan and can start immediately in the browser or via a mobile app. Multi-tenancy lets many customers use the same application while their data stays logically separate. Updates are rolled out centrally and are available to all users at once. APIs enable integration with ERP, CRM or accounting.
Practical Examples
Salesforce as CRM: Companies manage customer relationships, sales pipelines and marketing campaigns entirely in the cloud without their own servers.
Microsoft 365: Email, documents, video calls and collaboration as a monthly subscription – usable from anywhere.
Shopify as e-commerce platform: Merchants build and run online shops without coding or their own hosting.
HubSpot for inbound marketing: From blog to email automation to lead management as one integrated SaaS.
Slack for team communication: Real-time messaging, file sharing and integrations with hundreds of other tools – ready to use.
Typical Use Cases
Mid-size companies replacing expensive on-premise licences with flexible SaaS subscriptions and cutting IT cost
Startups getting started quickly with professional tools without upfront infrastructure investment
Distributed teams working on the same data and documents in real time across locations
Companies building their own SaaS products as a recurring revenue stream with a scalable model
IT reducing admin work because updates and patches are applied by the vendor
Advantages and Disadvantages
Advantages
- No upfront investment: Usable immediately without hardware or long setup
- Automatic updates and maintenance by the vendor reduce internal IT load
- Scalable: User count and features can be adjusted to demand
- Access from anywhere enables remote work and global collaboration
- Predictable cost through monthly or annual billing instead of one-off licences
Disadvantages
- Vendor dependency (lock-in): Data migration can be complex and costly
- Ongoing cost can exceed a one-time licence at high usage over time
- Limited customisation: Specific requirements are often only partly possible
- Data protection and compliance: Sensitive data sits on third-party servers, raising GDPR questions
Frequently Asked Questions about SaaS
What is the difference between SaaS, IaaS and PaaS?
Is SaaS secure for business data?
When is building your own SaaS worth it?
Related Terms
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