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What is SaaS, how does it work and why is it so popular?

SaaS is becoming increasingly popular, with the market currently estimated to be worth 145.5 billion US dollars. And it looks like the industry is very resilient and set for further growth – with predictions that the market will hit a whopping 716.52 billion US dollars by 2028.

It’s clearly a topic worth knowing more about, but what actually is it, how does it work, and why is it so popular?

If you still think SaaS is something to do with backchat, you’ve definitely come to the right place. And if you have an idea of what SaaS is but are looking to get to grips with the basics, this one’s for you, too.

What is SaaS?

SaaS is one of those acronyms that gets thrown around a lot, but it tends to be over-complicated and poorly understood.

SaaS stands for software as a service: it’s when software is hosted by a third-party provider and delivered to customers over the internet, as a service.

It’s a cost-effective alternative to the old model of making a one-off purchase of software that buyers need to host, implement, and maintain themselves.

SaaS products are usually aimed at businesses, helping them to optimize things like marketing, sales, customer service and operations efforts. Popular examples include HubSpot, Google, Asana and Microsoft 365.

There are also some products that have become popular with individual consumers, like note-taking app Evernote, personal budget tracker Mint and even dating apps like Bumble.

How does SaaS work?

The SaaS delivery model works with a multitenant architecture, which basically means it can serve multiple tenants – groups of customers – at once, from a single server.

Each user or business has their own version of the application, along with their own data, customizations, data and access controls. But it all comes from a shared code base that can be updated and maintained centrally.

SaaS tends to be paid for on a monthly or annual subscription basis per ‘seat’, and can be accessed on demand, from anywhere via a web browser, desktop computer, or mobile device.

Why has SaaS become so popular?

There are lots of factors that have led to the rise of SaaS, including:

  • Increased access to high speed internet connections
  • Standardization of digital technologies
  • Growing popularity and usage of web interfaces
  • Widespread adoption of mobile devices
  • Rise of remote working

SaaS has shown its resilience throughout the COVID-19 pandemic, and it’s becoming clearer and clearer that this model of cloud computing is here to stay.

What are the benefits of SaaS?

  • It’s accessible

SaaS applications run through an internet browser, so you can use any operating system to access them. 

  • It’s easy to update

Because SaaS applications run in the cloud, vendors can update their software centrally without adversely affecting business operations for users. 

  • It’s cost-efficient 

There’s no huge initial investment, allowing smaller businesses to access software tools that originally only huge companies could afford. 

  • It’s scalable 

Access to SaaS is usually a per-seat, per-month arrangement, so a business only takes on as much as it needs, and can add more users as needed.

  • It reduces the risk of data loss

Data is routinely saved in the cloud and users can switch between devices without losing any data.

  • It makes it easy to analyze data

Because everything is run through a centralized platform, it’s easy to capture and analyze data.

What is the future of the SaaS industry?

The next generation of SaaS is going to be all about flexibility, simplicity and interoperability.

There’s likely to be an increased adoption of specialist services, more end-to-end integration, a growing emphasis on relationships between customers and key providers, and ever-more sophisticated, data-driven insights.

The future is looking very bright for both SaaS businesses and organizations that are using SaaS tools to their advantage. The big test going forwards is whether software products fall into the essential or the nice-to-have category.

Want to find out more about our SaaS platform? Contact us today.

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