DEFINITION of 'Software As A Service - SaaS'

Software-as-a-Service (SaaS) is a software licensing model in which access to the software is provided on a subscription basis, with the software being located on external servers rather than on servers located in-house. Software-as-a-Service is typically accessed through a web browser, with users logging into the system using a username and password. Instead of each user having to install the software on his computer, the user is able to access the program via the internet. Businesses commonly use SaaS in customer retention management, human resources and procurement. Technology companies, financial services companies and utilities have led the business world in adopting SaaS technology.

BREAKING DOWN 'Software As A Service - SaaS'

The rise of Software-as-a-Service coincides with the rise of cloud-based computing. Before SaaS was available, companies looking to update the software on their computers had to purchase compact disks containing the updates. For large organizations, updating software was a time-consuming endeavor. Over time, software updates became available for download through the internet, with companies purchasing additional licenses rather than additional disks. However, this still required a copy of the software to be installed on all devices that needed access to it.

Advantages of Using Software-as-a-Service

SaaS offers a variety of advantages over traditional software licensing models. Because the software does not live on the licensing company’s servers, there is less demand for the company to invest in new hardware. Users can access the software through a web browser from multiple locations, including outside the office. It is easy to implement, easy to update and debug, and can be less expensive (or at least have lower up-front costs) since users pay for SaaS as they go instead of purchasing multiple software licenses for multiple computers. SaaS has numerous uses including tracking leads, scheduling events, managing transactions, automating sign up, auditing and more.

Disadvantages to Software-as-a-Service

Drawbacks to the adoption of SaaS involve data security and speed of delivery. Because data is stored on external servers, companies have to be sure that it is safe and cannot be accessed by unauthorized parties. Slow Internet connections can reduce performance, especially if the cloud servers are being accessed from far off distances. Internal networks tend to be faster than internet connections.

Types of software that have migrated to a SaaS model are often focused on enterprise-level services, such as human resources, customer relationship management, and content management. These types of tasks are often collaborative in nature, requiring employees from various departments to share, edit and publish material while not necessarily in the same office.

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