What is SaaS? Understanding the distribution method companies use to host software on the internet

• SaaS is a distribution model for software licensing that lets companies host their software on the internet.
• Users don't have to download anything to their device to access the software.
• SaaS platforms come in two forms: verticals and horizontals.

Depending on what you do and who you talk to, you've either never heard of SaaS, or you've seen the term thrown around as though you were supposed to understand what that meant without any context. We're here to make sure you're in the know the next time it pops up.

What is SaaS?

The gist is this: SaaS (Software as a Service) is a distribution model for software licensing where the provider hosts applications on the internet (or makes them available through a website), so that users don't have to download anything onto their computers to access the software. (SaaS falls under the cloud application umbrella.)

Even if you're unfamiliar with SaaS, you've probably used a service that uses this model. In fact, it's becoming so popular that one survey found 86% of organizations expected most of their software needs to be met by SaaS by 2022.

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Here's what else you should know about SaaS.

Types of SaaS

There are two main types of Saas.

• Verical: These focus on the needs of a single industry. For example, Clio only addresses law firms.
• Horizontal: These work across several industries. Quickbooks, for instance, lets users do bookkeeping regardless of their profession.

While both are using the same distribution model, the difference lies in how they serve their customers (and who those customers are.)

Advantages and disadvantages of SaaS

As with anything, there are pros and cons to making the switch to a SaaS platform.

Advantages

• It elimates the need for hardware maintenance and associated costs.
• It could translate to savings on IT costs (one study found companies saved an average of 15% in this area).
• Data is available through a centralized platform, so it's easier to access.
• It's usually faster to implement updates and changes since there isn't hardware involved.
• It eliminates the needs for software updates on the user side.

Disadvantages

• Customers no longer have the option to stick with an older version of the software if they prefer it.
• Potential for software-integration problems when switching to a SaaS model.
• In the event of a data breach, the company (not the cloud vendor) is on the hook and may face legal consequences.
• Customers may prefer a one-time fee pay structure, rather than the more typical monthly fee option available from many SaaS companies.
• Slow internet speeds affect the software's performance.

Examples of SaaS

You've probably already heard of, if not used, a SaaS platform. For reference, here are a few examples of popular SaaS companies.

• Google Drive: Lets you create documents, presentations, spreadsheets, and forms that automatically update.
• Dropbox: Acts as a file-hosting service so users can easily share files and back up their work.
• Salesforce: Focuses on ​​customer relationship management.
• DocuSign: Allows you to easily exchange and sign documents.
• Slack: Lets workers communicate with each other through direct messages.