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What is SaaS? 25 FAQs About Software as a Service

Do you want to know what is SaaS? Here are 25 FAQs about Software as a Service that will amaze you.
What is SaaS? 25 FAQs About Software as a Service

10 - 15 years ago, not many people knew about the opportunity for SaaS (Software as a Service); there were either downloadable software/apps or websites.

People didn’t know much about a solution that could be something between a website and downloadable software. Interestingly, concepts that influence SaaS today have been in place for over 30 years already.

We are going to answer 25 of your most frequently asked questions about Software as a Service.

1. What is SaaS?

Well, this is the most important question – most importantly, because people easily confuse it with other technologies and acronyms. SaaS is an abbreviation that stands for Software as a Service – but this term does not even closely define SaaS.

Some would even say that it is a misnomer because an On-Premises software can also be used for/as a service.

SaaS is basically a software that is only sold to people under a license and subscription model – most importantly, it is centrally hosted and you cannot download it as you do with MS Office or Adobe Software. SaaS is one of the three categories of cloud computing (PaaS and IaaS being the other two) and it is also known as on-demand software.

2. How Old is SaaS and what was its earliest form?

Unlike what most SaaS users think, SaaS is not new. While the internet came into existence back in 1989 – SaaS can actually be traced back to the 1970s.

Yes, you’d be right to ask yourself how SaaS could exist back in the 1970s when the internet didn’t event exist. We’re not talking about the exact model of SaaS that we have today, but the closest thing to SaaS dates back to 1965 with IBM’s 360 Model 67 and the computers used to provide computing power to banks and Government offices.

What made it it SaaS? Back then, even 2 GB hard drive would cost more than $200,000 and the most advanced IBM computers had 2 MB of Ram.

It is needless to say that since computer technology was new and cash registers were way cheaper than computers (with all their extra power and functionality), no one could afford or wanted to buy computers yet.

So IBM rented the power and space to big banks and Government offices; they named this service TSO (Time Sharing Options). This development paved the way for future SaaS services and the advent of computer/IT/internet technology that we know these days.

IBM Mainframe
IBM Mainframe

3. What are some of the most famous examples of SaaS?

You probably use SaaS products without thinking about it, and know a lot of the companies below already – you just don't think of their business model as being SaaS:

  • GoogleGoogle Drive, GSuite or Gmail
  • MicrosoftMS Office 365
  • Amazon AWSit is all about cloud-based web services
  • OracleResponsys (an online platform for all interactions with clients) and Eloqua (marketing automation platform for B2B marketers)
  • SalesforceExactTarget, Pardot, Salesforce CRM
  • AdobeThe whole suite of Adobe creative tools: Photoshop, Illustrator, InDesign
  • IntuitTurboTax is one of many SaaS products offered by Intuit
  • HubspotHubspot has sales, service and marketing software as well as a free CRM
  • Slacka team communication tool for collaboration
  • MailChimpan email marketing automation software for small businesses
  • ShopifyAn eCommerce platform to set up your online store and manage your inventory
  • DropboxDropbox is an online storage service.
  • LastPassa smart tool that automatically generates and saves the passwords you use
  • Zooman online video conferencing app
  • Zendeska customer support ticket system
  • GitHubif you’re a developer you already know GitHub; it hosts source code for millions of developers and companies worldwide.

4. What are the biggest advantages of SaaS?

There are many advantages of SaaS – I’ve covered the most important of them:

  • SaaS excludes the need to download and maintain data on your own systems. This means that whether it is a laptop or your organization’s servers. It reduces the maintenance and cost of ownership.
  • Subscription-based payments are easy, flexible and affordable. With this model you can discontinue the service and avoid paying for it; and start again whenever you need it. The pay-as-you-go model lets businesses control and forecast expenses.
  • You can get access to the services within your budget and your requirements. The verticality of SaaS allows people to opt only for the features they really need.
  • Global access is another plus. You can access a SaaS tool anywhere from the world.

5. What are the biggest disadvantages of SaaS?

The flexibility of SaaS also has some drawbacks:

  • You do not own the software or app. The moment you stop paying, you lose access to the premium features, and in some cases, the associated data too.
  • You do not own the data and it will not be accessible the moment you stop using SaaS services.
  • SaaS does not always integrate well with applications built in-house, or mix with your corporate network infrastructure.
three men sitting on chair beside tables

6. Why SaaS is so complex to understand?

SaaS is complicated because the "service" can be delivered in a variety of ways. Through an app, through a platform, or on your desktop. Some services are used by other companies building products (developer tools etc.) and in the end, your service ends the moment you stop paying.

7. Which industries/niches SaaS is bracketed with?

SaaS is a branch of cloud computing so it is definitely linked with Cloud computing; it is one of cloud computing’s 3 main categories. At large, it is connected to non-SaaS IT businesses.

This takes us to the realm of services for SaaS businesses. A SaaS business needs all kinds of services starting from coding to development of apps/software to web design and development, to video/animations, to marketing and copywriting for the main website.

People into all these niches often bracket SaaS with Tech or IT in general. There are marketers and copywriters who bracket SaaS with eCommerce because eCommerce (payment gateways as well as digital shopping platforms) is closely linked to SaaS. Shopify, for example, is not just SaaS; it is eCommerce as well.

8. How differently does SaaS impact a business?

There has been a mass exodus from On-Premises to SaaS – not only do the buyers prefer subscription base buying (playing it safe), but the big IT companies have also moved to SaaS. One of the biggest examples is Microsoft Office 365; MS Office used to come in CD form, not long ago people were still purchasing it online – but now there is a subscription-based model.

Businesses love the idea of a “no-strings-attached” use of software and apps. They can use the services and pay as they go, which was not the case before.

The best thing is that SaaS can be customized just like a unique buyer/user of purchased software will tweak it as per their personal/organizational requirements. In terms of updates, SaaS is faster than software; SaaS applications are more frequently updated when compared to software.

9. Which industries are affiliated with SaaS (where can you use it)?

SaaS is not limited to any industry or niche, but it is bracketed with and most widely used in following niches and industries:

  • CRM
  • Marketing, Sales and Automation Software
  • ERP
  • Productivity and Team Management
  • Financial and Accounting
  • Project Management
  • Digital Solutions for Digital Skills
  • IT & Application Management
  • HR & Talent Management
  • eCommerce
  • Business Intelligence and Privacy Protection, etc.
person using phone and laptop

10. What are Vertical SaaS and Horizontal SaaS?

This is a concept similar to T-shaped marketing; vertical SaaS addresses the needs of a particular industry – for example, SaaS for eCommerce and SaaS for project management, etc.

The horizontal SaaS, however, is focused more on category or skill, e.g. marketing, automation, developer tools, and HR, etc.

11. What is the license and/or model under which a SaaS is normally sold?

SaaS can be used and issued under a perpetual license. While the user is allowed to perpetual use of services and the stored data, they do not own the solution like they do in case of software. It is a pay-as-you-go model and license is only offered on a subscription basis. However, some companies offer a lifetime subscription too. The data and the service are centrally controlled.

12. What is the nature and architecture of SaaS?

The nature of SaaS is a multitenancy. Software multitenancy is a typical type of architecture that allows the rendering of the same service on the same server(s), but to multiple people and organizations. The users are termed as “tenants” who use the same space and service.

13. Why SaaS is so famous as a solution?

There are certain reasons why SaaS is talk of the town – here are the reasons for all this fame:

  • With the passage of time, web won more clients when compared to software. Internet made website something that will never die – only transform. Web-based UI is more attractive than software.
  • With the passage of time and development of web page technologies, languages and frameworks, making a robust website is much easier and cheaper than before. The whole “web development” trend is the reason why Web is a winner over software.
  • Internet is the biggest reason – everything is big, beautiful and speedy with internet and its wide spread. Software are now a thing of the past.
  • HTTPS protocol and SSL made web far safer than ever and thus countered the argument that software is safer.

14. What are the challenges and/or limitations in the case of SaaS?

All is not kosher in case of SaaS; there are certain challenges and limitations as well:

  • Data is the biggest problem – companies are making money for both: protecting the data and selling it to marketing companies and analytics firms. The problem with SaaS is that your data is never yours. It is the biggest concern for SaaS companies too.
  • Multitenancy is a problem because except for huge SaaS companies like AWS, it is not easy to customize the features for all types of tenants and offer the capacity to tweak those features even further.
  • Some SaaS companies require integration with sensitive data that is located on customers’ computers or servers. This is yet another privacy issue because all such companies are the biggest target of data theft experts and hackers.
  • Law can force a company to submit to a search and seizure warrant, but such warrants are not effective against dynamically stored data. This is what Julian Assange revealed; that Government has allowed big IT companies to store consumers’ data and give that to the Government.
  • Another big concern is that there is no guarantee that a SaaS company would be able to give you the uptime agreed in SLA (Service Level Agreement). Uptime is the time for which a service is bound to be available. There are many technical caveats to this.

15. What is the level of data protection in the case of SaaS?

As I have mentioned above, the biggest nightmare of any SaaS company worth mentioning is data theft. And they are using state of the art end to end encryption technologies and everything they can to make sure that your data stays safe.

Take Chef.io’s CHEF INSPEC for example; this tool is all about security and compliance automation. You can use this to avoid security and compliance breaches.

Also, you can go for Data Escrow – just like an escrow payment facility. This process will automatically submit and keep updating the copy of your data with an independent third party. This way a SaaS company can ensure that clients’ data remains safe and protected against data loss.

16. What future holds for SaaS and people who are into this industry as sellers or buyers?

SaaS is not only attracting to companies selling SaaS solutions like startups and existing legacy companies, but also a giant workforce of services companies, employees and freelancers with the digitals skills to operate in the cloud.

Here are a few stats that show why SaaS will be very relevant for the coming decades:

  • As per an estimate, the global public cloud market was to reach $258 billion in 2019. We won't know the full figure until 2020 of course.
  • In 2018, the average yearly cloud budget of an organization was $2.2 million.
  • About a 30% of the IT budget of medium to large companies is invested in cloud computing.
  • Hybrid cloud adoption is at 58% in 2019
  • 90% of companies are already on the cloud.
  • AWS (from Amazon) is a leading SaaS vendor with a 32% share.
  • In 2021, 94% of workload will be processed by cloud/SaaS companies.
  • In 2019, the US’ public cloud spending has reached roughly $124.6 billion.


17. What and how to choose a SaaS vs On-Premises solution?

In most of the cases, unless you are so touchy about your data and you are so not willing to trust data escrow, you would go with SaaS, because On-Premises will be soon a thing of the past. It was actually Google Docs that forced Microsoft to make MS Office 360.

How to choose in a SaaS vs On-Premises scenario?

  • How complex is your business? If your business needs are complex, you should not go for costly SaaS solutions. They are still not fully capable of handling complex situations without charging too much. So, small to medium companies with a complex business should go for On-Premises.
  • Go for SaaS, if your needs are more about digital connection, interconnectivity and project management, etc. In these fields, On-Premises is far behind SaaS.
  • SaaS is also a good idea in case you do not want all the functionalities of an On-Premises software (because the cost is too much), but you can choose for the required functionalities, at an affordable rate, offered by a SaaS company.

18. Can I customize SaaS software?

SaaS, at the beginning of this business model, was very simple and customization was not totally there. However, modern SaaS solutions, even the reasonably priced ones, offer you a wide array of customizations that you can make. From UI to required functions to Add-on, you can do a lot with a SaaS software.

Security, Protection, Anti Virus, Software, Cms

19. Who owns my valuable data?

The most expensive commodity today is data – everyone needs it, from governments to marketers, to hackers – simply everyone.

Part of doing due dilligence on a vendor, you should check the SLA and make sure that there is a clause that gives you uninterruptible and unchallengeable right and entitlement to your data.

Most of the SaaS companies know how sensitive data is and how concerned businesses are about this topic – so they already have this clause.

In the worst-case scenario, you lose your data only when there is a hacking attempt on a SaaS companies’ servers – otherwise, they are not supposed to use your data for any commercial or personal use whatsoever.

20. What if my SaaS provider goes out of business?

It’s like paying to an electricity provider – won’t you be concerned when that provider goes out of business? However, these companies are very professional with your data and services. They either let you know in advance or in case of a buyout, they let the data center hosting companies keep it up and running until you export the data to a new vendor. An SLA should be there to ensure both – a decent time period for you to prepare for shifting the data and a clause to bound the vendor to let you export all the data before complete shutdown.

21. How do I know if I can trust a SaaS vendor?

Carefully read the SLA (Service-level agreements) the vendor agrees to to make sure it meets your expectations. Examine marketing materials, do a real demo of the product and talk to customers to ensure it solves your problems.

22. What are the internet/operating system requirements and limitations in the case of SaaS?

You will need a good internet connection –  make sure you have a stable and high-speed internet connection. Some products like Gmail and Dropbox also offer off-line functionality so you can work on the plane or when your internet goes down.

23. What is the difference between SaaS and Cloud?

Cloud Computing is a general category of which SaaS is one component. The other two are PaaS (platform as a service) and IaaS (infrastructure as a service).

24. What is the difference between SaaS, PaaS, and IaaS?

SaaS is a software for service, PaaS is Platform as Service and IaaS is Infrastructure as Service. Magento Commerce Cloud is an example of PaaS and Digital Ocean is an example of IaaS.

Matrix, Technology, Tech, Data, Digital, Network

25. How can my organization adapt to SaaS-based solutions?

Frankly speaking, it is not easy to go from On-Premise to SaaS overnight. Big companies rely on the control afforded by On-Premise and once you replace On-Premise with SaaS, you have to accept the implications in terms of payment terms, infrastructure management and software upgrades.

There will be new challenges and surprises. Here are some tips to help your organization adapt to SaaS.

  • Have workshops where your employees and managers get to know how Saas is different, why it is better and how to maximize its use within the company.
  • Plan for a different financial model – your cash flow will be different and you will need to monitor how your spend evolves over time.
  • Take care of technical requirements before you implement any solution. If you haven’t picked one of the few vendors that you like, do spend the time talking to your peers and existing software customers to get their perspective.

I hope this extensive guide answered all your SaaS questions, comment below if you want to share your thoughts or have any questions.