SaaS (Software as a Service) is a delivery model in which software is centrally hosted by a provider and accessed by customers over the internet, typically on a subscription. Users run the application in a browser or thin client without installing or maintaining it themselves.
Why it matters
SaaS shifts the burden of hosting, scaling, updating, and securing an application away from the customer and onto the provider. Instead of buying a perpetual licence and running software on your own hardware, you pay a recurring fee and the vendor keeps everything running. That single change reshaped how most modern business software is bought, delivered, and maintained, from email and CRM to accounting, design, and developer tooling.
How SaaS differs from on-prem and licensed software
On-premise / licensed software is installed on servers you own or rent, under a one-time or perpetual licence. You are responsible for the infrastructure, patching, backups, uptime, and security. Upgrades are deliberate, sometimes painful, projects.
SaaS flips this: the vendor hosts a single, continuously updated version of the product and rents access to it. There is nothing to install, upgrades roll out automatically, and you typically pay per user or per usage tier each month or year. The trade-off is less control over the runtime environment, the upgrade timeline, and where your data physically lives.
SaaS is also distinct from the lower layers of cloud computing. IaaS (Infrastructure as a Service) rents raw compute and storage; PaaS (Platform as a Service) rents a managed environment to build on; SaaS delivers the finished application to the end user.
How it works: multi-tenancy and subscriptions
Most SaaS products are multi-tenant: one shared application and infrastructure serve many customers ("tenants") at once, with each tenant's data logically isolated. This lets the provider run a single codebase, ship updates to everyone simultaneously, and spread infrastructure cost across the whole customer base, which is what makes the subscription model economical. Some products offer a single-tenant or dedicated deployment for customers with stricter isolation or compliance needs.
The commercial side is the subscription model: predictable recurring revenue for the vendor and predictable operating cost for the customer, usually billed per seat, per usage, or per feature tier. Because revenue depends on customers staying, SaaS vendors are strongly incentivised to keep improving the product, maintain uptime, and reduce churn.
Pros and cons
Advantages: fast onboarding with no installation, automatic updates and security patches, accessibility from anywhere, elastic scaling handled by the vendor, and a shift from large upfront capital expense to operating expense.
Trade-offs: ongoing cost that never ends, dependence on the vendor's uptime and roadmap, limited control over data residency and customisation, potential lock-in, and integration or compliance constraints. The right choice depends on your security requirements, budget shape, and how much control you genuinely need.
Related terms
SaaS products are commonly built on a microservices architecture and orchestrated with Kubernetes so that a multi-tenant platform can scale on demand. If you are building or buying for a specific vertical, see our SaaS industry page, and browse the full glossary for adjacent concepts.
FAQ
What does SaaS stand for?
SaaS stands for Software as a Service: software that is hosted by a provider and delivered to customers over the internet, usually for a recurring subscription fee.
How is SaaS different from on-premise software?
On-premise software is installed and maintained on your own servers under a perpetual licence, while SaaS runs on the vendor's infrastructure and is accessed over the web, with the vendor handling hosting, updates, and security as part of the subscription.
Is SaaS the same as cloud computing?
No. SaaS is one cloud service model alongside IaaS (infrastructure) and PaaS (platform). SaaS delivers a finished application to end users, whereas IaaS and PaaS provide the building blocks developers use to create applications.
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