Software as a Service (SaaS)

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Overview

Software as a Service (SaaS) is a software distribution paradigm where a cloud provider hosts the applications and makes them accessible online to customers over the Internet. SaaS applications run on the servers of a SaaS provider. Salesforce, Netflix, and Zoom are some common examples of SaaS applications.

What is Software as a Service (SaaS)?

Software as a Service (SaaS) is a software distribution paradigm where a cloud provider hosts the applications and makes them accessible online to customers over the Internet. SaaS applications run on the servers of a SaaS provider. SaaS is one of the three cloud computing models, whereas the other two are PaaS and IaaS. SaaS apps are used by many companies, institutes, IT professionals, businesses, private players, government agencies, etc. Products range from high-tech IT equipment to personal entertainment options like Netflix. SaaS products are commonly promoted to both B2B and B2C users, unlike IaaS and PaaS.

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History and Future of SaaS

The history of SaaS is concise and brief, unlike the long history books. IBM and other mainframe computer vendors were the first to offer the idea of rented computing capabilities. These businesses began providing giant corporations like banks with a set of computing resources and storage accounts. It was viewed as a cost-effective solution by these large firms and enterprises. Businesses at the time concentrated on creating their own software and utilizing the mainframe suppliers' computing capacity. SaaS has undergone several changes since the 1960s and has not only endured for more than five decades but has also developed into a technology that is still advancing quickly. SaaS and cloud computing are both expanding quickly and don't appear to be slowing down anytime soon. According to experts, the SaaS market is still in its middle age and has not even hit its peak. This basically suggests that while the SaaS market is mature enough, its most incredible days are yet ahead of it.

Future commercial uses of high-performance computing will include the analysis of enormous volumes of consumer data and monitoring application logs. SaaS may one day be able to help with significant business challenges like predicting which customers will depart or determining the best cross-selling tactics for your organization. Given the daily increase in the need for high-volume data, software performance, and backup, it makes sense why so many firms want to outsource to cloud-based services.

SaaS Architecture

Each user of the SaaS service is served using the same single instance of the SaaS application that is deployed on the host servers. Clients are also known as tenants in the cloud computing model. The strategy employed by SaaS applications is called the multi-tenant strategy. All the tenants use the same version of the SaaS application. It is important to note that even though all the tenants will be using the same version of the SaaS application, their data will still be appropriately segregated and stored at separate locations.

The main advantage of using the multi-tenant architecture is that the cloud service provider can easily maintain, upgrade and fix the problems associated with the deployed application version. A single change applied to the application will solve the problems of all the tenants/users of the application. If there were multiple deployed copies of the application, it would take multiple iterations of changes to fix the same problem for all the users. The multi-tenancy model also allows access to a bigger pool of resources while maintaining key cloud features like security, speed, and privacy.

Characteristics of SaaS

The following are some of the key characteristics of the SaaS cloud computing model.

Automated Provisioning

The provisioning of the users with the services must be automated since the users should be able to access the SaaS applications instantly. B2B and B2C clients frequently utilize SaaS applications, and as a result, this necessity mandates the creation of organizations/users simply by invoking online services and providing the necessary access credentials. Platforms for Cloud Services Brokers (CSB) can automate this process to give users on-demand access to SaaS apps. De-provisioning capability, or the ability to remove access from users/organizations anytime a client decides not to utilize the Software as a Service application, is another crucial feature.

Multi-tenancy Model

Multi-tenancy is a software paradigm that allows deploying a single program to serve many clients. Today's applications are made so that each tenant's storage area is segregated by having a separate database altogether, having different schemas inside a single database, or having the same database with discriminators. Tenants may be given the option to customize some aspects of the application.

High Availability

Many tenants share SaaS applications, and it is anticipated that they will always be readily available. As a result, the Software as a Service applications should offer their users a high level of SLA. Applications should be available worldwide, around-the-clock. SaaS applications should also expose an endpoint/API to allow continuous availability and health status checks.

Subscription-based Billing

The complexity of license costs, upgrade costs, etc., are not included in the pricing of SaaS products. Most Software as a Service (SaaS) products are subscription-based, allowing users to purchase them whenever they are needed and stop using them whenever the business determines they are no longer required. SaaS systems typically use seat-based billing, where the number of seats purchased determines the price. It can have a range of pricing structures and billing intervals, including monthly, quarterly, half-yearly, and annual fixed. Only a small number of contemporary SaaS apps allow for usage-based charging. The SaaS systems should be able to generate invoices, which is another crucial feature.

Data Security

In the modern world, ensuring that the data and company information is safeguarded against corruption and unauthorized access is crucial. Knowing how well the data is secured is crucial because Software as a Service applications are created to be shared by several tenants. We must enable certain data with encrypted storage for a specific tenant, and those same data types should not be accessible to another tenant. As a result, SaaS apps must include a solid key management framework or the ability to interact and interface with other key management frameworks. Additionally, connection with the CASB (Cloud Access Security Brokers) system will boost confidence in data security. Highly strict Role Based Access Controls (RBAC) must be implemented to protect the data.

QoS

In addition to the usual list of users, every firm also has a preferred or significant list of users who use their application. These days, rate limitation is a useful tool to offer better service to all types of consumers. To ensure smooth commercial operations, the number of hits and transactions can be upper capped by some value. Additionally, SaaS systems can be configured to allow for rate limitation and Quality of service (QoS), which aids businesses in managing their user bases.

How Does SaaS Work?

SaaS utilizes the cloud delivery model to function. An ISV (Independent Service Provider) may hire a cloud provider to host the program in the provider's data center, or a software provider may host the application and accompanying data using its own servers, databases, networking, and computing capabilities. Any device with a network connection will be able to access the program. Web browsers are often used to access SaaS apps. Because of this, businesses that use SaaS apps are not required to set up and maintain the software. Users can access the program by just paying a membership charge, which is an already-made solution.

Businesses can combine SaaS apps with other software using application programming interfaces (APIs). A company may, for instance, create its own software tools and interface them with the SaaS service using the APIs of the SaaS provider. In the SaaS model, a single copy of the application is made available to consumers via a network that the provider developed, especially for SaaS distribution. All the application clients use the same copy of the source code, and any new feature (in case rolled out) is distributed to all the users.

SaaS Examples

Some of the famous SaaS examples are discussed below.

Salesforce

Salesforce, an American company, launched in 1999, is perhaps the best cloud-based CRM (customer relationship management) program. It is designed to increase business sales by managing all of its leads and prospects in one location. It is a prestigious example of SaaS apps with a sizable user and client base for over a decade, producing attractive ROI for many small and medium-sized firms with outstanding sales methodologies.

Microsoft Office 365

The cloud-based Office solution O365 (Microsoft Office 365) assembles the top tools for how people work today. Users will have a wonderful experience using the MS Office 365 solution, which includes email, word, PowerPoint, and additional services like Outlook, Skype for Business, SharePoint, Microsoft Teams, etc. MS Office 365 is a SaaS (Software as a Service) solution, meaning that end users can subscribe to Microsoft Office 365 and access its features from anywhere.

Google Workspace Apps (GSuite)

G Suite is a composite pack of services like Gmail, Google Docs, Google Sheets, Google Drive, etc., that don't require an introduction. One can simply notice the significance of these SaaS apps since we are already familiar with the practicality of all of these SaaS examples. It isn't easy to imagine working a day in the office without them. G Suite offers a comprehensive ecosystem to individuals, small businesses, and organizations with its all-encompassing product line. It distinguishes itself from the competition thanks to its accessibility on all platforms and compatibility with Android.

Netflix

Netflix is a US-based streaming service. It is based on a subscription-based model and offers a selection of well-regarded films, TV series, animation, and documentaries on several linked devices. With a vast global user base, Netflix is recognized as the world's leading entertainment and media brand. Netflix's ability to provide top-notch entertainment to its viewers 24 hours a day, seven days a week, is key to its value proposition. Access to a massive library of content, including stuff from various genres, is included in this commitment. With no advertising, it offers on-demand streaming and 24-hour availability.

Zoom

The COVID-19 pandemic forced a significant chunk of the world's population to use virtual meeting tools for their daily affairs. Zoom is a video conferencing software that comes to the rescue of millions. Zoom enables customers to participate in online meetings, conferences, webinars, and events thanks to a robust cloud platform. Screen sharing, live chats, admin control, and other user-friendly features are among many included in it.

Slack

Slack is another well-known example of SaaS application development services. This essentially functions as a feature-rich platform for business communications. Slack covers both private one-to-one messaging and group conversations. It supports all file-sharing options and is supported by privacy protection and complete end-to-end encryption security. Slack provides an ideal method of communication and cooperation when messaging apps are too casual and email is too much (too official). Many businesses utilize it as their virtual headquarters because of its straightforward user interface and compatibility with different apps.

Shopify

All shops looking to sell their goods online can use Shopify, which offers a one-stop shop for all of their eCommerce store needs. With the help of this CMS (content management system), small and medium-sized organizations may build both straightforward static websites and complicated, fully functional eCommerce websites. It enables users to set up their e-commerce platforms with integrated SEO capabilities, access to apps, and connectivity with various payment gateways without any prior coding knowledge.

Services Provided by SaaS Providers

The following are the services provided by SaaS providers.

Enterprise Resource Planning (ERP)

Enterprise resource planning (ERP in short) refers to the software and processes used to plan marketing initiatives. It is used to organize and control all of a company's manufacturing, financial, and supply chain management operations. ERP offers the user a variety of functions and covers every aspect of business one could imagine. SaaS makes users' jobs easier than ever by offering billing and sales services as well. It is employed to lessen the enormous workload placed on those working on these tasks in any firm.

Social Networking Services

SaaS can effectively handle and keep track of user data. Additionally, it offers a cloud database and effectively manages various types of data. As a result, social networking sites employ it to maintain user data tracking. This bunch of services is included in the SaaS social media services.

Customer Relationship Management (CRM)

CRM is a collection of business methods and software procedures that aid in creating enduring relationships with customers. The CRM software ensures a comfortable working relationship with the customer by preventing hiccups. It operates with utmost efficiency to boost the company's profit. This function is included in the SaaS business services. CRM stores all the customer information in their software, including their purchase history, personal information, shopping habits, spending fashion, and helps to provide them with better service each time.

Document Management and Mail Services

Document management services are one of the services offered by SaaS. These services benefit all types of businesses and allow users to read, produce, manage, and send electronic documents. Slack and Zoho forms are a few examples. Also, to avoid the inconvenience of bulk emails and the unpredictability of the number of emails, SaaS offers its users mail services as well. Many service providers employ this SaaS mail service to maintain hassle-free email communication.

SaaS Pricing Models

The following are the major SaaS pricing models. We will briefly discuss each one of them.

Flat Rate Pricing

Flat rate pricing is like the software licensing model used before cloud infrastructure, but with the advantage of being invoiced (typically) monthly. The most straightforward approach to marketing a SaaS service is offering a single product, a single set of features, and a single price.

Usage-Based Pricing

This pricing technique, often known as the Pay As You Go model, directly links the price of a SaaS product to its usage: if you use the service more frequently, your bill will increase; if you use it less frequently, your spending will fall. This pricing method is most frequently employed by software companies dealing with infrastructure and platforms (like Amazon Web Services), where businesses are charged depending on the volume of API requests, transactions executed, or gigabytes of data used. However, SaaS businesses are increasingly developing novel methods to modify the model, such as by charging for scheduled social media postings or per-invoice accounting software.

Tiered Pricing Strategy

The de facto pricing model utilized by most businesses is tiered pricing, while flat rate and usage-based pricing are uncommon in mainstream SaaS. In essence, tiered pricing enables enterprises to provide a variety of "packages" with various feature combinations offered at various price points.

Per User Pricing

Per User Pricing model is one of the most popular SaaS pricing models due to the ease of its use. A single user pays a certain monthly fee; the fee doubles when they add another user. When they add the third user, the fee triples (of the base price of one user). Customers will find it very simple to comprehend what their monthly membership entitles them to, and SaaS firms will find it simple to monitor and forecast their revenue.

Per Active User Pricing

The active user pricing model is a variation of the per-user pricing model. Many SaaS providers advocate yearly paying cycles, especially those that cater to businesses. This could imply that a new client would have to pay upfront for hundreds of staff without any assurance that they would really utilize the program. Per active user pricing directly addresses this issue by enticing consumers to join as many users as possible while assuring that only active users will be charged.

Per Feature Pricing

In this model, as the name suggests, the functionality offered in each pricing tier is broken down into several pricing tiers using per-feature pricing, with the more expensive packages having a more comprehensive range of features.

Advantages and Disadvantages of SaaS

Some of the advantages of using SaaS include:

  • SaaS comes to the rescue of many organizations as they no longer need to run applications on their local systems/servers or in their local data centers.
  • Using the SaaS model saves the cost of purchasing procurement and maintenance of the hardware devices. The cost of installing and supporting the requisite software on the local hardware is also removed.
  • SAAS's maintenance costs are extremely low because of the automatic updates and the lower cost of the initial setups.
  • Scalability is another advantage of using the SaaS model. So in case the number of users on your application increase multifold, you can quickly scale your service to handle the increased traffic.
  • SaaS services can readily interface with other software through common APIs. By using SaaS, the process of integrating the services with other software can be done without the need for manual installations or difficult coding.

Although there are many advantages of using the SaaS model, there do exist some limitations to using this model, as discussed below:

  • There is not much control of the user on the service. The user has no control over how it functions because it is delivered to them in a ready-to-use format at their end. The software's capability is based on the vendor's capability.
  • In the SaaS model, most data is saved on the cloud. Thus, it makes few users question this model's security aspect. Users are constantly faced with security threats when working with data.
  • Due to higher latency caused by accessing data remotely rather than locally, it is slower than most client/server applications.

Conclusion

In this article, we learned about:

  • The meaning and architecture of the SaaS cloud computing model.
  • The key characteristics of the SaaS model including automated provisioning, multi-tenancy model, subscription-based model, etc.
  • The services provided by the SaaS model including Enterprise resource planning (ERP), Customer relationship management (CRM), etc.
  • SaaS Pricing models, including Flat Rate Pricing models, Usage-Based Pricing models, Per-User Pricing models, etc
  • Advantages and Disadvantages of SaaS.