Software as a Service (SAAS) – Definition

Cite this article as:"Software as a Service (SAAS) – Definition," in The Business Professor, updated April 11, 2019, last accessed October 23, 2020,


Software As A Service (SaaS) Definition

Software-as-a-Service (SaaS) simply describes a software licensing and distribution model that accommodates an external or a third-party provider host application and makes it accessible to internet users. SaaS is located on external servers rather than internal servers. Also, access to SaaS software is based on subscription because it is centrally hosted, this is why some people refer to it as ‘on-demand software’.  Every user need not install SaaS on their computer before accessing it. All that is needed internet connection given the fact that it requires a user to log in with a username and password through a web browser.

A Little More on What is Software As A Service or SaaS

The emergence of SaaS is associated with cloud computing, it is regarded as one of the three categories of cloud-based computing. In past times, due to the need to constantly update computer softwares, early companies purchase compact disks containing updates before they are able to update software on their computers. But since SaaS came on board, updating softwares has been much easier for large companies. Once a copy of SaaS is installed on devices that need to access it, instead of purchasing compact disks, companies purchase software licenses which are available for downloads on the internet.

Advantages of Using Software-as-a-Service

Software-as-a-Service (SaaS) is a software licensing model that is not dependent or live on a company’s server, it is located on external servers and not servers located in-house. SaaS as a modern software has more benefits over traditional licensing models. Accessing SaaS is less time-consuming and less-demanding for companies that want to access it. Having its location on external serve, users can easily access it through a web browser.

Aside from the fact that it is affordable, it can easily be used for software updates and debugging. Companies can schedule events, manage and audit transactions and track leads using SaaS.

Disadvantages to Software-as-a-Service

Despite its numerous benefits. SaaS also has some dark sides and drawbacks. The common disadvantages of SaaS that many users experience are;

  • Fear of data insecurity.
  • Slow speed delivery.
  • SaaS performance is determined by how strong an internet connection is.
  • Unreliable data sharing.

SaaS uses external servers for storing of data and this induce fear in companies as regards the confidentiality of data stored using SaaS because the data can be accessible to unauthorized persons. Bad internet connections also impede the performance of SaaS, hence, a total breakdown of internet connection create a disability for SaaS. Companies then discover that internal networks are faster than internet connection which is a drawback to SaaS.

References for Software as a Service (SAAS)

Academic Research on SaaS

SaaS business model for software enterprise, Liao, H. (2010, April). In Information Management and Engineering (ICIME), 2010 The 2nd IEEE International Conference on (pp. 604-607). IEEE. This paper discusses SaaS business model for software enterprise, it includes the impacts of SaaS on information management for software enterprises. It also examines SaaS as a rapidly growing software licensing and distribution modeling contrast to the traditional software enterprises. Basically, traditional software enterprises derive their revenue from fees they charge companies on software upgrades, software maintenance, copyright licensing and others. SaaS however, presents a software business model for software enterprises that will help them cut down the exorbitant expenses that come with the traditional software licensing. This paper highlights business views and technique, software service selection and classification, service pattern and charges as well as the advantages and disadvantages of SaaS business model.

Design choices underlying the software as a service (saas) business model from the user perspective: Exploring the fourth wave of outsourcing, Joha, A., & Janssen, M. F. W. H. A. (2012). Journal of Universal Computer Science, 18 (11), 2012. Previous studies of the Software-as-a-Service (SaaS) were dominated by the perspective of the service provider when discussing design choices underlying SaaS business model as against User organization perspectives. This paper highlights users’ perspectives of the design choices underlying the SaaS business model. This is an empirical study of service delivery model of SaaS as well as the design choices of its business model. Two case studies are examined for an understanding of design choices in SaaS business model from the user organization perspective. The SaaS service characteristics and value source, cloud deployment model, its governance, target group, demand and supply management, data architecture configuration and tenancy model and many other aspects were examined.

A service broker and business model for saas applications, Moore, B., & Mahmoud, Q. H. (2009, May). In Computer Systems and Applications, 2009. AICCSA 2009. IEEE/ACS International Conference on (pp. 322-329). IEEE. 1 The SaaS business model has become highly significant as its users and subscribers spread across businesses. With the increase in the number of services provided by SaaS and its customer base, this paper suggests that a service broker is needed to manage the services and subscribed customers of the SaaS business model.  This paper further proposes a trusted service broker for SaaS and also acknowledged the roles that service-oriented architecture (SOA) and Web services will play in harnessing the vision of SaaS. It further examines the how a trusted service broker will provide integrated applications that will enhance the businesses or tasks of SaaS business model subscribers.


Software as a service: Study and analysis of saas business model and innovation ecosystems, Churakova, I., Mikhramova, R., & Gielen, I. F. (2010). Gent Universiteit.This paper presents an analysis of the SaaS business model and its innovation ecosystems which refer to the diverse participants that are interested in its innovations. Discussed in this paper is how the SaaS business model originated and what it entails. An analysis of the different business model components, value proposition for small and medium sized enterprises (SME), and value proposition for large enterprises are also investigated. Furthermore, in the examination of SaaS ecosystem, innovation forces are analysed and this include bargaining powers exhibited by both suppliers and customers. This paper also examines the implementation of the SaaS business model and what the future has in stock for it.

Cloud migration architecture and pricing–Mapping a licensing business model for software vendors to a SaaS business model, Fowley, F., & Pahl, C. (2016, September). In European Conference on Service-Oriented and Cloud Computing (pp. 91-103). Springer, Cham.Software-as-a-Service (SaaS) is a cloud-based computing which involves cloud migration architecture and pricing. Cloud migration means moving an on-premise software into the cloud. Previous studies have significantly dealt with cloud cost models, cloud migration and architectural migration. This paper focuses on the linkage between architecture and software utilisation in business models and costing. This paper examines this linkage by surveying software vendors that provide business solutions to their clients using the cloud. It investigates the challenges these service providers are likely to face while providing these solutions and while mapping a licensing model to a cloud monetisation model. Findings presented in this paper are results from five migration case studies.

An Analysis on Enterprise Competitive Advantage Determination Factors to Effect Enterprise Results for Each SaaS Business Model: focusing on Group-Wares, POS …, Kim, S. P., & Lee, C. Y. (2008). Journal of Digital Convergence, 6(2), 65-76.In recent times, software licensing and distribution is evolving, there is shift from Application Service Provider (ASP) to a newly-emerged method (Software-as-a service) and this gave a rise to SaaS business models. Group-Wares, Point of sale (POS), Customer Relationship management (CRM) and Enterprise Resource Planning (ERP) are the most representative SaaS business models in Korea. This paper analyses the determining factors for market competitiveness exhibited by these emerging SaaS business models. Through questionnaire survey that was administered, an analysis on enterprise competitive advantage determination for each of these SaaS business model is presented.

Construction of Software Enterprise SaaS-Based Business Model, Liao, H., & Tao, C. (2009, September). In Management of e-Commerce and e-Government, 2009. ICMECG’09. International Conference on (pp. 62-65). IEEE. The SaaS business model has expanded to a variety of businesses across different regions including e-commence and e-business domains. This paper looks into the construction of software enterprise SaaS business model, it analyses and discusses the composition and construction of the SaaS business model for software development. The Saas enterprise-based methodology, software development application, and the software procedures and values are discussed in this paper. Technical development of software as well as the effect of user demand change are investigated in this paper. The paper suggests that software enterprises should capture user’s demands as this would increase users’ satisfaction.

SaaS business model implementation on the international and Russian markets, Artemov, A. (2011). (Doctoral dissertation, Graduate School of Management, Saint Petersburg University, Master in Information Technologies and Innovation Management). This paper investigates the implementation of the SaaS business model on the international markets and Russian markets. This is a research that was conducted using questionnaire surveys and the aim of the research is to analyze the differences in the implementation of SaaS business model by Russian vendors. It also explores the importance of cloud computing on technological innovations and policies that can increase the innovative capacity of cloud services. This paper also presents an empirical study of SaaS business model implementation using the quantitative research method.

From software as a good to software as a service (SAAS): a methodology to define the transformation towards the SAAS business model, Arrieta, L. O. E. (2016). (Doctoral dissertation, Universitat Abat Oliba CEU). This paper describes the methodology that defines the transformation of SaaS (software-as-a service) into the SaaS business model. It presents thoughts that sprouted into software providers and distributors deciding to migrate into a SaaS business model as against staying with the current business model. This migration is regarded as a movement from software as a good to software as a service, this paper examines this migrating decision. Pricing strategy in a long-term sustainable SaaS model can be a difficult task, this paper however presents a systematic approach to analyse pricing strategies that are mostly used by service providers in a sustainable SaaS application.


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