Software as a Service (SaaS): Definition and Examples (2024)

What Is Software as a Service (SaaS)?

SaaS is a licensing model in which access to software is provided on a subscription basis, where the software is located on external servers rather than on servers located in-house.

Software as a Service is commonly accessed through a web browser, with users logging into the system using a username and password. Instead of each user having to install the software on their computer, the user can access the program via the internet.

Key Takeaways

  • Software as a Service (SaaS) is a software licensing model, which allows access to software on a subscription basis using external servers.
  • SaaS allows each user to access programs via the Internet, instead of having to install the software on the user's computer.
  • SaaS has many business applications, including file sharing, email, calendars, customer retention management, and human resources.
  • SaaS is easy to implement, easy to update and debug, and can be less expensive than purchasing multiple software licenses for multiple computers.
  • Drawbacks to the adoption of SaaS include data security, speed of delivery, and lack of control.

Understanding Software as a Service (SaaS)

The rise of SaaS coincided with the rise of cloud-based computing. Cloud computing offers technology services through the internet, which often includes access to data storage, networking, and servers.

Before SaaS, companies looking to update the software on their computers had to purchase compact disks containing the updates and download them onto their systems. For large organizations, updating software was a time-consuming endeavor.

With SaaS, users can log in through the internet or web browser and connect to the service provider’s network to access the particular service. Technology companies, financial services companies, entertainment, and utilities have led the business world in adopting SaaS technology.

SaaS History and Characteristics

SaaS can trace its origins to a concept called time-sharing, which was developed in the late 1950s and early 1960s to make more cost-effective use of expensive processor time.

As hardware and computing became less costly, organizations made the shift to individual ownership of personal computers using on-premise software but were impeded by ongoing software and hardware maintenance of the individual computers.

In the mid-90s, the growth of the Internet saw the inception of the "online cloud," which allowed organizations to access software from anywhere. By 1999, Salesforce became the forerunner in the SaaS space and both startups and industry giants including Microsoft, Oracle, and SAP were eager to move toward it.

The SaaS provider hosts the customer's software and delivers it to approved end users over the internet, giving customers network-based access to a single copy of an application that the provider created specifically for SaaS distribution. When new features or updates are released, they are then rolled out to all customers.

Today, SaaS is ubiquitous. With pure-play companies like Adobe, Salesforce, Shopify, and Intuit leading the way, the SaaS market is expected to reach $145 billion in 2022.

Advantages and Disadvantages of SaaS


SaaS offers a variety of advantages over traditional software licensing models. Because the software does not live on the licensing company’s servers, there is less demand for the company to invest in new hardware. It is easy to implement, easy to update and debug, and can be less expensive than purchasing multiple software licenses for multiple computers.

SaaS has numerous applications, including email services, auditing functions, automating sign-up for products and services, managing documents, and Customer relationship management (CRM) systems, a database of client and prospect information. SaaS-based CRMs can be used to hold company contact information, business activity, product purchase history, and sales leads.

The SaaS model works well for enterprise-level services, such as human resources. These types of tasks are often collaborative, requiring employees from various departments to share, edit, and publish material while not in the same office.


Drawbacks to the adoption of SaaS center around data security and speed of delivery. Because data is stored on external servers, companies must ensure it is safe and cannot be accessed by unauthorized parties. Security is especially important to SaaS business users in the aerospace and defense sector.

Slow Internet connections can reduce performance, especially if the cloud servers are accessed from far distances. Internal networks tend to be faster than Internet connections. Due to its remote nature, SaaS solutions also suffer from a loss of control and a lack of customization.

SaaS Advantages

SaaS Disadvantages

  • Increased security risks

  • Slower speed

  • Loss of control

  • Lack of customization

Examples of SaaS

• Google Docs

Launched in 2021, Google Docs is Google's free online word processor where individuals just need to log in through a web browser for instant access. Google Docs allows you to write, edit, and even collaborate with others wherever you happen to be.

• Dropbox

Founded in 2007, Dropbox is a cloud storage service that lets businesses store, share, and collaborate on files and data. For example, users can back up and sync photos, videos, and other files to the cloud and access them from any device, no matter the location.

SaaS expanded and today supports home offices and entertainment daily as users log on to Netflix, Zoom, DocuSign, Adobe, Shopify, and Slack.

SaaS Security

As companies adopt cloud-based models for software products, concerns arise regarding security and privacy. Where management was once responsible for the updates on in-house software, corporations now must rely on third-party management of their encryption, identity and access management (IAM), data privacy, and downtime or incident response. They must also depend on an adequate level of communication with technical assistance.

SaaS Pricing

A SaaS product is commonly more cost-effective for a company than a traditionalsoftware license, as setup and installation are not needed. SaaS providers rely on subscription-based pricing models for customers such as tier-level pricing per person or group or a flat rate annual fee. Users may also choose an ad-based model where the SaaS earns revenue through advertising within the cloud space.

SaaS vs. IaaS vs. PaaS

"As a service" products fit into one of three main categories: SaaS, IaaS, and PaaS.

SaaS uses the Internet to deliver subscription software services, which are managed by a third-party vendor. Well-known SaaS examples include Dropbox, Google Workspace, and Salesforce.

Infrastructure-as-a-service (IaaS) offers access to resources such as servers, storage, memory, and other services. It allows organizations to purchase resources as needed. Some common IaaS examples include Amazon Web Services (AWS), Microsoft Azure, and Rackspace.

Platform-as-a-service (PaaS) provides a software development platform over the web. Specifically, it allows developers to concentrate on software creation without concern for storage and infrastructure.

What Is SaaS Marketing?

SaaS marketing utilizes standard marketing practices to promote and acquire leads for cloud-based software applications and information services.

What Is B2B SaaS?

B2B SaaS simply refers to companies that sell software services to other businesses. These products help organizations optimize a wide variety of functions including marketing, sales, and customer service.

How Is MRR Calculated for a SaaS Business?

Monthly recurring revenue (MRR) is an important metric for SaaS businesses that utilize a monthly subscription pricing model. The calculation of MRR is simple: multiply the average revenue per customer by the total number of accounts for that given month.

The Bottom Line

SaaS, or Software as a Service, uses cloud computing to provide users access to a program via the Internet.Without having to install software in-house, SaaS allows each user to access programs typically through a subscription service. SaaS has many business applications, including file sharing, customer retention management, supply chain management, and human resources, and is used by applications such as Netflix, Slack, Dropbox, and Google Workspace.

Software as a Service (SaaS): Definition and Examples (2024)


What is SaaS and examples of SaaS? ›

Software as a service (SaaS) allows users to connect to and use cloud-based apps over the Internet. Common examples are email, calendaring, and office tools (such as Microsoft Office 365). SaaS provides a complete software solution that you purchase on a pay-as-you-go basis from a cloud service provider.

What is SaaS easily explained? ›

Software-as-a-service, or SaaS for short, is a cloud-based method of providing software to users. SaaS users subscribe to an application rather than purchasing it once and installing it. Users can log into and use a SaaS application from any compatible device over the Internet.

What are some examples of software as a service? ›

Examples of popular SaaS products include:
  • Salesforce.
  • Google Workspace apps.
  • Microsoft 365.
  • HubSpot.
  • Trello.
  • Netflix.
  • Zoom.
  • Zendesk.

Is Netflix a SaaS? ›

Netflix is indeed an SaaS company that sells software to watch licensed videos on demand. It follows a subscription-based model whereby the customer chooses a subscription plan and pays a fixed sum of money to Netflix monthly or annually.

What is SaaS in everyday life? ›

10 Popular Examples of SaaS Applications
  • SalesForce. Salesforce, one of the most popular b2b SaaS examples, is an American cloud-based software company that provides customer relationship management (CRM) services and software. ...
  • Zendesk. ...
  • Zoom. ...
  • Dropbox. ...
  • G Suite. ...
  • Quixy. ...
  • Slack. ...
  • 8. Box.
Apr 5, 2024

Is Amazon a SaaS? ›

Amazon is not primarily a SaaS company. However, it does offer a number of SaaS products and services, including Amazon Web Services. AWS is a comprehensive, cloud-computing platform that provides a broad range of services, such as compute power, database storage, and content delivery services.

How do you explain SaaS to a child? ›

Software as a Service (SaaS): SaaS is a cloud computing model that delivers software applications over the internet. Users can access the software from any device with an internet connection, eliminating the need to install and maintain software on their own computers.

Which is the best suited example for SaaS? ›

34 Software as a Service (SaaS) Examples you NEED to know in 2024
  • Freshdesk.
  • UserGuiding.
  • Wix.
  • Asana.
  • Jotform.
  • Mailchimp. ⭐GetResponse G2 Rating: 4.2 (out of 678 reviews)
  • Slack.
  • DropBox.
Oct 19, 2021

What is SaaS in interview questions? ›

Software-as-a-service (SaaS) refers to a business model where users pay to access cloud-based software instead of installing and maintaining the applications on personal devices. If you are seeking a related role, you might get asked to attend a job interview as part of the hiring process.

What are the most common uses of SaaS? ›

The most common types of SaaS solutions are Customer Relationship Management (CRM), Enterprise Resource Planning (ERP), Content Management System, (CMS), Project Management Software, Sales, Marketing, eCommerce.

Is Zoom a SaaS? ›

Zoom Workforce Management is a cloud-based SaaS service for organizing, optimizing, and systematically managing enterprise workforces through the Zoom web portal.

What are the most common SaaS applications? ›

Some popular SaaS examples include Salesforce for CRM, Slack for collaboration, Dropbox for cloud storage, Zoom for video conferencing, Shopify for e-commerce, and Quixy for no-code app development.

Is Gmail an example of SaaS? ›

Gmail, Slack, and Microsoft Office 365 are all commonly used SaaS products. Client relationship management systems , or CRMs, are also SaaS-based, as are many customer service and support solutions .

Is Facebook a SaaS? ›

There is no payment involved for end users in using a platform. The closest thing Facebook has to a SaaS is its Ads Manager, which works in the backend, and business users can access it. You basically pay to display your ad to other FB users. But Facebook, on its own, is not a SaaS.

Is Google an example of SaaS? ›

From a network that spans the globe to innovative solutions that transform organizations, Google Cloud has SaaS built into its DNA. Google Cloud enables you to build better SaaS products, scale efficiently, and ultimately grow your business. Learn more about SaaS transformation .

What are the 2 main varieties of SaaS? ›

There are two different types of Software as a Service model, horizontal SaaS and vertical SaaS. A horizontal SaaS is a structure well used by established cloud services such as Salesforce, Microsoft, Slack, Hubspot etc.

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