What is SaaS?

Software as a service (SaaS) is a software delivery model where a supplier provides access to cloud solutions charging a recurring fee. A SaaS solution, such as Slack or HubSpot, is available via the Internet if you pay for a subscription.

How does SaaS work?

A vendor places their software on their servers and data centers and gives their clients access to this software via the Internet. So, instead of purchasing a license for the software and installing it on their local computers, clients get access to the cloud solution they currently need. Typically, vendors provide multiple plans for different client needs, so that they can scale as their business grows or cut expenses if they need less features.

The SaaS vendor handles the security layers and ensures regular software updates that are immediately available for their clients. Such a model lets businesses get the tools they need at an affordable price without the need for custom SaaS development or purchasing on-premise software.

Key SaaS technologies

Since SaaS solutions are quite flexible, they quickly adapt to trends. The most widely used technologies in SaaS today include:

An AI automation layer that allows for optimizing workflows and speeding up multiple processes.
Cloud infrastructure, such as AWS and Azure, ensures scalability and flexibility.
APIs in SaaS solutions enable connection with other third-party tools.
Modern frontend frameworks like React ensure responsiveness and interactivity.
Backend languages and frameworks like Python and Node.js.
Security layers with robust encryption guarantee user data safety.
Microservices architecture is what makes SaaS tools easy to manage behind the scenes.

SaaS, PaaS, and IaaS models

SaaS stands for software as a service, which means that the vendor provides the entire application stack. At the same time, there are other cloud solutions, such as PaaS and MaaS.

PaaS, or Platform as a Service, implies cloud-based environments for building your own apps and software. For example, it's Microsoft Azure App Service and Heroku. This model is mostly used by developers.
IaaS, or Infrastructure as a Service, provides virtual computing resources, such as servers and storage. For example, it's Microsoft Azure Virtual Machines and DigitalOcean.

Learn more about the differences between SaaS, PaaS, and IaaS and check what a service provider delivers in the comparison image below.

SaaS doesn't require significant initial investment since vendors typically provide multiple packages for different business sizes.
SaaS solutions are easy to use and implement in business infrastructure compared to traditional on-premises solutions.
Vendors regularly update their software, so you always have the latest version with all the improvements included.
It's easy to adapt a SaaS solution to your current business needs for its flexibility and scalability.
This software is accessible from any location, making it easy to manage the work of remote teams.
The robust security allows using SaaS even for cases that require high protection standards.
It's easy to integrate SaaS solutions with other tools via APIs to make them work as a unified whole.

SaaS categories and examples

The SaaS meaning is closely connected to its specific functionality, industries, and businesses it's used for.

Depending on a business's size and coverage, SaaS categories include:

Horizontal SaaS tools that are used across different industries, such as Slack.
Vertical SaaS is for specialized tools for some specific industries, such as Flexport.
Micro-SaaS includes tools for niche businesses and small teams, such as Hypefury.
Enterprise SaaS is software created for large-scale companies, such as Salesforce.

Depending on the functionality, SaaS solutions are built for:

Customer Relationship Management (CRM), such as HubSpot, Zoho, and Salesforce.
Collaboration and communication, such as Microsoft Teams, Slack, and Zoom.
Human Resources (HR), such as People HR and Breathe HR.
Marketing and sales, such as MailChimp and SemRush.
Accounting and financial management, such as Xero and FreshBooks.
Ecommerce platforms, such as Shopify and BigCommerce.
Cloud storage, such as Dropbox and Google Drive.