Articles / 30/06/2016

Cloud Computing Stack 101 (I): SaaS


SaaS, or Software as a Service, describes any cloud service where consumers can access software applications over the Internet. The applications are hosted in the Cloud and can be used for a wide range of tasks for both individuals and organizations.

Google, Twitter, Facebook, and Flickr are all examples of SaaS with users able to access the services via any Internet-enabled device.

Enterprise users are able to use applications for a range of needs, including accounting and invoicing, tracking sales, planning, performance monitoring, and communications (including webmail and instant messaging).

Using SaaS at home

Individuals are also frequently using SaaS without even realizing it. Every time you back your computer up using online backup software or pull data from the iCloud onto your iPhone, you are using the technology. Companies that provide SaaS house the servers that hold this data in a secure facility and will back it up elsewhere to ensure it remains safe and secure. So if your iPhone ever crashes and you lose your files, there is no need to worry because they are safely backed up in the iCloud. You can simply sign into iTunes and pull them off of Apple’s secure server.

How SMBs are using SaaS

SaaS is used in various aspects of business. Some businesses have customer relationship management software (CRM) that allows them to store customer information in a secure server online.

Other businesses use cloud computing for their human resources management to keep employee data under lock and key.

Companies are frequently adopting software as a service for information storage because they typically no longer have to worry about the cost of purchasing and maintaining the servers that house the software on their own. Both hardware and human resources expenses are reduced.

SaaS benefits over purchased software

Utilizing SaaS is akin to renting software rather than buying it. With traditional software applications, you would purchase the software upfront as a package and then install it onto your computer. The software’s license may also limit the number of users and/or devices where the software can be deployed.

On the other hand, SaaS users subscribe to the software rather than purchase it – usually on a monthly basis. Applications are purchased and used online with files saved in the cloud rather than on individual computers.

Why is demand increasing for SaaS?


Worldwide Software as a Service revenue is expected to reach USD 106 billion (+21%) by 2016 as more companies invest in cloud technology. The increasing demand for SaaS-based applications for business is characterized primarily by the following factors:

  • Improved availability
  • Better reliability
  • Need for quick deployment
  • Reduced internal system dependencies
  • Multi-tenancy
  • Pay-per-usage
  • Higher system accessibility
  • Resource scaling based on needs
  • Flexible pricing

What to choose – SaaS or on-premise?

The first step to answering this question is to determine the complexity of your business. Typically SaaS is recommended for SMBs with fairly straightforward business processes that are looking to reduce upfront expenses.


SaaS solutions are cost-effective, but they are still working their way toward handling the complex requirements of large enterprise businesses.

For example, a medium-sized manufacturer that makes highly engineered and custom aerospace parts may be best-suited for an on-premise system simply because on-premise systems have been around longer and has more functionality.

On the other hand, a manufacturer that specializes in nuts and bolts will find all the functionality they need in a SaaS solution like NetSuite or Plex Systems. It really comes down to understanding what your organization’s needs are and which solution can best help you address those in the near term – and over time.

SaaS characteristics

A good way to understand the SaaS model is by thinking of a bank which protects the privacy of each customer while providing service that is reliable and secure on a massive scale. A bank’s customers all use the same financial systems and technology without worrying about anyone accessing their personal information without authorization.

Multitenant architecture

A multitenant architecture in which all users and applications share a single, common infrastructure and code base is maintained centrally. As a result of SaaS vendor clients all being on the same infrastructure and code base, vendors can innovate more quickly and save the valuable development time previously spent on maintaining numerous versions of outdated code.

Easy customization

The ability for each user to easily customize applications to fit their business processes without affecting the common infrastructure. Because of the way SaaS is architected, these customizations are unique to each company or user and are always preserved through upgrades. That means SaaS providers can make upgrades more often with less customer risk and much lower adoption cost.

Better access

Improve access to data from any networked device while making it easier to manage privileges, monitor data use and ensure everyone sees the same information at the same time.

Security requires discipline

Did you know that up to 83% of large enterprises have had sensitive data placed in unauthorized cloud storage? Because there’s nothing to install (not really), it’s easy for a company to lose track not only of the SaaS in use but also of the security surrounding, how their data is transferred, or used.

What this means is that if you’re using SaaS (and the odds are pretty good that you do by now), you have to educate your employees on the potential security risks of SaaS. You also have to craft and enforce policies on acceptable usage.

What if my SaaS vendor goes out of business?


This is a legitimate concern in the world of software as vendors come and go all the time – whether through industry consolidation or business failure. The data, however, is typically yours to keep.

Most SaaS vendors prepay their data center hosting company to “keep the lights on”. This prepaid fee is meant to safeguard companies to ensure their data is accessible in the event something happens with the vendor.

The important thing here is to make sure your SLA has a clause that explicitly states that you can export your data from your provider, which most SLAs do outline as a standard practice. This clause should also include how often and in what type of format you may access your data. It is common for SLAs to stipulate that the vendor will help migrate your data for an appropriate fee.

All things considered

SaaS can be a good bet if you are buying a new kind of application that the vendor is going to update frequently with changes and functionality enhancements. Buying the ability to keep on the forefront of those changes through the SaaS model may be worth to your business while keeping up with those changes is more difficult with traditional packaged software.

By the same token, SaaS can also make sense for applications that have become commoditized, that have been around for such a long time that every company has essentially the same one and the software no longer offers companies a competitive advantage. Proprietary reservation systems in the travel industry are a good example of a commoditized system that airlines are replacing with SaaS offerings.

SaaS certainly has its advantages and place in your application portfolio, but do not get taken in by the SaaS hype. When it comes time to select an application, figure out what your company wants from the application in question first and proceed from there. When it comes time to select a vendor, consider the basics such as the company’s financial stability, its reputation, market position, quality, scalability, reliability, security, price, and potential benefits of its product.