Last Updated on May 8, 2021 by Tracy Jackson
SaaS vs cloud computing – can you compare the two?
To understand the difference between SaaS and cloud computing, we must first know what each means.
Cloud computing is a model where servers, networks, and data storage are all available via the internet rather than being maintained on a computer on-site.
Cloud computing has three main components – SaaS (Software as a Service), PaaS (Platform as a Service), and IaaS (Infrastructure as a Service).
SaaS is a component of cloud computing. Companies typically purchase SaaS products by subscription and sign in to those systems using the internet and a web browser.
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What Are Cloud Services?
Cloud services are systems, programs, or data warehouses that store or maintain data and computing resources in a virtual location rather than on-site servers.
The internet is the ‘cloud’.
People use the cloud on a personal or business level for access and storage of services.
For example, you can store your photos on a cloud service (like Google Photos) instead of using up space on your smartphone.
Gartner forecasts worldwide end-user spending on public cloud services to grow 18.4% in 2021 from $257.5 billion in 2020 to $304.9 billion.
What is a SaaS Service?
SaaS services are cloud services accessed by subscription. The software applications can be used across multiple devices and users using a single login. It is owned and maintained by a separate entity.
Within the cloud service industry, the SaaS model is the most popular business model.
PaaS and IaaS are other cloud software models that are also making headway.
How does a SaaS model work?
The SaaS business model is unique because the end-user does not own the product but leases the software application from the software vendor.
There are certain factors that vendor SaaS and cloud computing vendor needs to focus on:
For a subscription-based service, clients need to pay regularly to continue using the service. Vendors must find efficient ways to keep track of this monthly recurring revenue.
The key to a successful business is to retain your existing customers. It takes more for you to invest in a new customer than to keep an existing one. Customer retention is at the forefront of successful SaaS application businesses.
Every day new SaaS applications are appearing in every niche. Regular upgrades to the application software are crucial to keeping your customers satisfied to continue doing business with you.
Why do companies use SaaS?
SaaS is a cost-effective solution.
Maintaining on-site servers and computer networks can be expensive.
Businesses with on-site servers need to buy equipment, maintain a space to house the server(s), and employ a team to support the network.
SaaS is straightforward!
End users have immediate access to the critical systems as soon as they pay the subscription. Nothing needs to be installed, maintained, or set up for them to access the system.
They sign in and are ready to go!
SaaS is up-to-date.
End-users get access to the most recent software version because the entire system is a subscription rather than an in-house installed software package.
How Has SaaS Evolved?
SaaS systems have evolved since they began in the mid-1990s. The two terms SaaS and cloud computing are recent buzzwords.
In the beginning, many organizations were hesitant to jump on the cloud bandwagon. Business owners did not want to give up control of their servers.
Over the years, as many businesses became more customer-centric, SaaS applications became more popular.
- Access to the latest and greatest in terms of technology and upgrades,
- Plenty of cloud storage,
- Access to a ton of analytics and reporting capabilities, and
- Customer-focused services, such as chatbots
It can provide organizations with significant amounts of data – more than they could collect and analyze on their own – at a much lower cost.
What Are The Benefits of SaaS?
The benefits of a SaaS model are:
Lower Up-front Cost
Software as a service applications cost lower because users do not have to set up any hardware and software to get started.
This is great for new businesses or smaller organizations that cannot afford large system expenses on-premise during start-up.
Quick and Easy
Traditional system purchases require installation on each computer on-premise.
The SaaS model is much faster. Each user is given the company’s key and accesses the appropriate program via the cloud.
The most current version of the program is ready to go.
SaaS and cloud-based models are accessible directly from a web browser.
Users can access the SaaS product through the cloud from their homes, offices, or phones.
With the speed at which business is conducted these days, having instant access via the web is vital to remain competitive.
Rather than installing updated versions of specific programs, SaaS services handle all upgrades.
Users will always have access to the most recent program release, and the service provider manages the updates.
System requirements and program availability can grow with the company. Subscription services can easily upgrade when a business succeeds or hires new employees.
What are the disadvantages of SaaS?
Lack of Flexibility
Typically, SaaS systems provide an out-of-the-box solution.
If a business needs change, the course or program cannot be adjusted or modified for individual client needs.
Cloud services provide security measures to ensure client data integrity, but clients are at the software vendor’s mercy.
If they choose not to encrypt data, the customer can do nothing to increase overall security.
Companies are entirely reliant on internet connection. If internet service is down, spotty, or unavailable, the web-based programs are also inaccessible to employees.
With traditional in-house program management, internet access is not as much of a concern.
Web-based services and programs may not run as quickly or be as responsive as traditional on-site server-based systems.
Users may experience lag time or freezing based on internet service and bandwidth available.
How Has SaaS Helped Companies Working from Home?
A study by Kong revealed that 43 percent of businesses quickened their cloud transformation because of the COVID-19 pandemic.
Flexibility is essential for most organizations these days, as was seen with the Covid-19 crisis. Many organizations had to find alternative procedures for employees who were traditionally on-site workers.
While VPNs and other processes exist to allow work-from-home solutions, users can securely access cloud programs anywhere without any additional intervention.
As the business landscape continues to change and evolve, many workers are beginning to demand more flexibility in their day-to-day work lives.
This places a higher demand for the ease and simplicity of SaaS service accessibility.
What Are Some Common SaaS Myths?
Myth 1: SaaS programs are less secure.
From a business perspective, clients are at the mercy of the product to provide adequate security.
There is no reason to believe that cloud-based services are less secure than on-site servers. It may be challenging to give up control of managing security.
It is helpful to understand the risks involved and educate your team on the security measures you need to take while using the product.
Myth 2: SaaS programs offer one solution.
While it is true that SaaS services are an out-of-the-box program, they are just as robust as on-site managed programs.
Most programs provide a dashboard of tools that companies can choose from to fit their business goal.
While on-site IT cannot make changes to the tools, most companies offer various solutions to clients based on industry.
Myth 3: IT professionals are anti-SaaS.
Like any new technology, it may take some time to embrace the changes.
As such, many IT professionals have been wary of SaaS solutions before they began working with them.
IT staff with experience working with SaaS solutions have found that managing an organization’s technical needs is more manageable with SaaS solutions on board.
Many maintenance tasks are the service provider’s responsibility, allowing IT teams to use resources elsewhere.
What is the future of SaaS?
Vertical Business Solutions.
Traditionally, SaaS services have provided horizontal solutions.
Salesforce is an example of this.
Each company that uses Salesforce is provided the same solution without any significant customization. This out-of-the-box type program solution will meet the basic needs of sales teams across many industries.
As SaaS becomes more commonplace, customers are demanding vertical solutions that provide program specifications based on industry to better meet client needs.
For example, in a vertical solution, companies that sell insurance will be provided with a different product than companies that sell cars.
SaaS companies are beginning to provide solutions customized to the industry rather than one-size-fits-all software programs.
Moving to PaaS solutions.
This will allow customers much more flexibility in their programs. It will also enable organizations to use specific apps to add to their original work to meet their company needs.
For example, a CRM solution for call center management may have an out-of-the-box program for call answering.
Still, it will have an add-on feature for email responses. This allows for greater customization, so individual organizations ultimately have a product that mirrors their requirements.
Again, in terms of out-of-the-box solutions, SaaS products are typically provided to clients with the full range of platform capabilities.
But what happens when companies don’t need the full range of services?
They end up paying more than necessary and using less of the program.
SaaS providers are beginning to offer more of an ala carte menu of options.
Companies can select the features they want and leave out the parts they don’t need to manage their business.
This allows for greater flexibility in programs and pricing as well as greater customer satisfaction.
Emerging Micro-SaaS Businesses.
With a vast amount of SaaS products providing broad-based solutions, an emerging niche is micro-SaaS companies.
Tyler Tringas came up with the term ‘micro-SaaS’. Here’s how he defines micro-SaaS:
“A SaaS business targeting a niche market, run by one person or a very small team, with small costs, a narrow focus, a small but dedicated user base, and no outside funding. Hence, micro-SaaS.”
These companies do not offer full CRM or Accounting solutions. They provide small add-on services compatible with the main SaaS product.
These micro-SaaS products are great solutions for clients who may not have all of their needs met through their current SaaS provider. It allows for greater customization based on the specific needs of the client. This is similar to PaaS; however, the micro-SaaS companies typically focus on small, individual add-ons, not various app solutions.
What Are Examples of SaaS?
The SaaS marketplace has grown tremendously over the past 20 years, with explosive growth in the past decade.
These are the industry leaders today:
Salesforce is one of the pioneers of the CRM cloud model. They have expanded into other areas, including social media and analytics.
With the Microsoft365 program, Microsoft continues to be a SaaS leader. They now offer a Sharepoint service as well as an on-demand SQL server database.
Amazon Web Services
Apart from being a successful eCommerce platform, Amazon offers companies a platform to build their own SaaS. They also act as a reseller of SaaS products from third-party vendors.
Google offers customers an enhanced version of their current free services, with the entire menu of Google options with expanded technology and services available.
Slack offers cloud-based customer service solutions that focus on managing stock, purchases, and overseeing billing and shipping products.
Is SaaS The Future?
So, SaaS vs cloud computing – what is the future?
SaaS has the brightest future among the three cloud components. It proves that real value need not be expensive.
SaaS has captured the attention of both vendor and end-user with its possibilities.
Unlimited functionalities, robust features, and high-quality customer support – all at startup-friendly pricing? SaaS is a contender to deal with in terms of successful business models.
What other factors do you think make the subscription-based model so appealing? I’d love for you to share your thoughts and insights in the comments!
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