What Is Software as a Service? Definition and Examples

Software as a service (SaaS) is a way of providing software over the internet for use. Instead of downloading and installing programs on your computer, you open them through a website or mobile app. SaaS is often available through a subscription, which means you pay to use the software for a certain period of time. This model is popular because it is easy to use, affordable, and does not require users to handle updates or maintenance. In this introduction, you will learn what SaaS is, how it works, and why so many people and businesses rely on this cloud computing model every day.

Cloud computing is a rapidly growing, in-demand field. If you're sharpening your knowledge of SaaS for your career, consider earning credentials for your study through IBM's Information Technology (IT) and Cloud Fundamentals Specialization. In as little as two months, you could master software management techniques and learn cloud computing fundamentals and trends while earning a shareable certificate for your resume.

What is software as a service?

Software as a Service, or SaaS, is a way to use software through the internet without downloading it to your computer. The software is hosted remotely by a provider and accessed through a web browser or app, usually for a recurring subscription fee. This subscription model setup makes it easy to get started quickly, access tools from any device with an internet connection, and avoid managing updates or maintenance.

SaaS benefits both users and software providers. Users often pay only for what they need, can try services at low or no cost, and avoid large upfront expenses. Cloud service providers can scale their services over time, add features to improve user experience more easily, and reduce support and infrastructure costs. Many people already use SaaS products every day, including platforms like Google Workspace, Facebook, and X (formerly Twitter). The market continues to grow, with U.S. SaaS revenue expected to reach $295 billion in 2025 [1].

What is software as a service in cloud computing?

Alongside SaaS, two other common models in cloud computing are Platform as a Service (PaaS) and Infrastructure as a Service (IaaS). Each cloud-based software delivery model offers a different level of control and responsibility, depending on what the user needs.

• SaaS provides ready-to-use software for end users, delivered over the internet.

• PaaS offers a cloud-based platform where developers can build, test, and deploy applications without managing the underlying hardware or software.

• IaaS delivers virtualized computing resources like servers, storage, and networking on a pay-as-you-go basis, giving users more control over their infrastructure.

While PaaS is similar to SaaS in its cloud-based delivery, it focuses on providing the tools developers need to create software. IaaS takes a broader approach by offering the foundational infrastructure that supports both platforms and applications.

Read more: IaaS vs. PaaS vs. SaaS: Intro to Cloud Computing

Software as a service examples

SaaS offers various uses for many different purposes, which is one of the reasons it appeals to a wide range of end users. Use cases include customer relationship management, accounting, customer support, creative projects, content management, and project management. Chances are, you’re already familiar with software as a service and may even use it on a free or subscription basis. Some popular SaaS companies that offer cloud-based applications include: 

• Google Workspace. Google Workspace refers to the suite of tools Google offers to help teams work more productively, including Gmail, Calendar, Drive, Docs, Sheets, Slides, Chat, and more. Google Workspace offers solutions at the individual, business, and enterprise levels. 

• Slack. Slack is a collaboration software as a service that allows teams to message, share files, and optimize task efficiency. It offers different functionalities and integrations with other software as a service companies, helping teams organize work and communicate more effectively. 

• Dropbox. Dropbox offers cloud-based data storage with additional features to make it easier to share with collaborators, back up devices, and add signatures to documents. It also offers state-of-the-art artificial intelligence features, making searching for items and functions within a customized dashboard easy. 

• Zendesk. Zendesk is an example of a SaaS that offers customer support and sales software. Companies and organizations can use this software for help desk, help request ticket systems, and customer service messaging functionality on their websites. 

• Hubspot. HubSpot is another customer relationship management software as a service example. It offers users solutions for everything from marketing and sales to content management and operations. 

• Salesforce. Salesforce offers customer relationship management software to help companies manage sales and marketing more effectively. The software tracks customers through the sales funnel and provides insights and tools for better relationship management and improved profitability. 

If you want to start using any of these services, you simply have to log into your account on any device and get to work. The cloud hosts your data and the software application itself. 

What are the advantages of software as a service?

Unlike traditional software, which required users to install copies on each device and handle their own updates, SaaS simplifies access and scales easily across individuals or entire organizations. It's designed to be flexible, with subscription plans that allow users to pay only for the features they need. This cloud computing services model also benefits providers. By offering pricing tiers, free trials, and add-on services like advanced integrations, project management tools, collaboration tools, or extra storage, companies can reach a wider audience while optimizing revenue. Subscriptions on a monthly or annual basis create steady income, and cloud delivery reduces the cost and complexity of software distribution and maintenance. Here are a few additional benefits of cloud-based solutions like SaaS:

• Low upfront costs. You can access SaaS for a lower upfront cost because the licensing is typically less expensive. Most SaaS models are subscription-based and offer pay-as-you-go solutions for companies. It can be attractive as you don’t have to make the long-term commitment of purchasing the software before trying it and deciding whether it works for your business needs. 

• Scalability. SaaS is scalable for companies. As your business grows, you can update your SaaS subscription to accommodate more users, accounts, or storage. SaaS payment models also make it easier to scale back down if you need fewer services. This sort of customizability is hard to replicate with traditional software distribution. 

• Speed. The fairly straightforward sign-up process of software as a service allows for a faster onboarding experience. New features and updates to the software are immediately available as all users interact with the same copy of the software. Upgrades do not affect the overall functionality of the software. 

• Accessibility. With SaaS, you can access software from anywhere you have internet access. Simply connect by logging into your account instead of downloading a unique copy of the software. SaaS's accessibility also encourages remote work and a global workforce. 

SaaS business model

The SaaS business model allows providers to generate steady, recurring income through tiered subscription plans based on features, users, or storage needs. This flexibility appeals to customers while supporting long-term profitability. Providers can also boost revenue by offering premium services like advanced features, enterprise packages, or priority support for an additional fee.

Potential challenges of SaaS vs. on-premises software

Software as a service benefits users and vendors alike, but you should also be aware of the challenges associated with software as a service:

• If your pricing models are not meticulously calibrated, the financial burden of hosting and maintaining SaaS platforms can quickly escalate. If left unchecked, these costs may outpace revenue generation. 

• Potential customers, whether individuals or businesses, may refrain from adopting SaaS to avoid the proliferation of shadow IT.

• SaaS companies tend to have a higher churn rate, or the rate at which customers cancel their subscriptions or fail to convert to paying customers. 

Planning ahead for these challenges can minimize their impacts on your SaaS campaign. 

Keep learning about SaaS with Coursera

Interested in launching your career in software as a service sales? Salesforce offers a Sales Operations Professional Certificate that can help you prepare for a career as a sales operations specialist in as little as four months. 

Or, sharpen your understanding of cloud computing infrastructure and technology with IBM's Information Technology (IT) and Cloud Fundamentals Specialization.