What is SaaS in Cloud Computing and How It Works

What is SaaS in Cloud Computing and How It Works-feature image
May 12, 2023 12 Min read

SaaS model stands for Software as a Service. It is a distribution mechanism for end users planning to introduce new software into their computing system. SaaS technology in cloud computing is one category of cloud computing systems.

The other two categories are infrastructure as a service (IaaS) and platform as a service (PaaS). IaaS, PaaS, Saas are thus three pillars of the cloud computing system.

What is Software as a Service (SaaS)?

The concept of SaaS has been around for the last few years. SaaS refers to Software as a Service, which is an alternative way of accessing software as opposed to the on-premise software. It is a subscription-based model, where the software is hosted in a virtual server known as the Cloud.

Any device with a web browser and internet connection can access SaaS Solutions , unlike on-premise software, which requires installation on the system.

What is SaaS in Cloud Computing?

Cloud computing systems have SaaS software (Software as a service) as their key integral part. SaaS permits users to take a subscription for software or an application thus saving them from the hassle of purchasing it. You can also rent such software through SaaS applications.

SaaS technology automatically reduces installation costs and maintenance charges. In fact, these companies install, operate, and maintain specific types of software or applications on behalf of the company.

SaaS as a software distribution model makes applications available on the internet across all major categories, be it infrastructure as a service (IaaS), platform as a service (PaaS) or software as a service (SaaS).

IaaS, PaaS and SaaS Applications – Explained with Examples

IaaSCISCO Metapod, Amazon Web services (AWS), Microsoft Azure, Joyent and Google Compute Engine (GCE).
PaaSSaaS Hoogle apps, Cisco WebEx, Dropbox, Concur, Salesforce and GoToMeeting.
SaaSAWS Elastic Beanstalk, Apache Stratos, OpenShift, Heroku, Force.com and Google App Engine.

Iaas PaaS Saas in cloud computing are three services providers that provide benefits and capabilities to their targeted users based on their core components. We have listed below the core features that distinguish IaaS, PaaS, and SaaS cloud from each other.

  • IaaS

The self-service model of IaaS or Infrastructure as a Service enables you to monitor and manage data centre infrastructures that are remotely situated.

This model offers services on an outsourced basis for strengthening computer infrastructure, such as, storage, networking, and virtualization. IaaS provides cloud-based alternative solutions to on-premise infrastructure.

Examples of IaaS: CISCO Metapod, Amazon Web services (AWS), Microsoft Azure, Joyent and Google Compute Engine (GCE).

  • SaaS

SaaS in cloud computing is a software distribution model that allows its end users to use cloud-based applications over the internet. SaaS companies launch their products at their data centre, and customers access them through their browsers.

Furthermore, businesses widely use the SaaS model to manage customer relationships, service desks, accounting, documents, and content management.

Examples of SaaS platforms: SaaS Hoogle apps, Cisco WebEx, Dropbox, Concur, Salesforce and GoToMeeting.

  • PaaS

PaaS or Platform as a Service is used by developers who specialize in software or application development. PaaS platforms are based on virtualization technology. They are also scalable in nature.

PaaS vendors host hardware and software on their own infrastructure and can be used by end-users anywhere and anytime for the application development.  PaaS supports multiple users and is a preferred choice for businesses focused on developing unique applications.

Examples of PaaS: AWS Elastic Beanstalk, Apache Stratos, OpenShift, Heroku, Force.com and Google App Engine.

Suggested Read: What is Cloud Computing (with Examples)

What are the Key SaaS Characteristics?

A SaaS cloud computing model allows you to enjoy all its services without worrying about technicalities or security issues. You need a subscription to get going with all your work. Below are the SaaS characteristics that make it super easy and hassle-free to use.

  • Highly Customizable: SaaS is designed to fit any organization’s unique requirements without majorly affecting its existing infrastructure. Even the frequent upgrades on SaaS can be done in the background without affecting the existing customer information.

  • Built on Multitenant Architecture: A multitenant architecture means that all users and applications share one common infrastructure and code that is centralized. This enables SaaS vendors to innovate quickly and save their time that was previously spent on maintaining different versions of outdated codes.

  • Improved Access: SaaS offers better access to data than any other network. This ensures that every user has secured access to the same information, which makes it easier for them to collaborate.

  • Subscription-Based Pricing Model: To save users from the complexity of licensing and upgradation cost, SaaS offers a subscription-based pricing model. It gives you the freedom to subscribe whenever you want to use the application. The pricing is calculated on the pay-per-user method which means that you pay according to the number of users in your company.

  • Security: SaaS offers encrypted storage which limits the access of sensitive information. You can also to integrate the SaaS application with an external Key Management Frameworks to ensure extra protection.

  • Collaboration: Inspired by social networking sites, SaaS applications facilitate multiple users to collaborate. Users can comment, assign and share tasks on the application to work together.

  • 24*7 Availability: When different users collaborate from across the globe, it is important for a SaaS application to be highly available 24*7. Also, SaaS provides monitoring APIs that help you to keep a check on the health of the application.

Benefits of Using SaaS Products

SaaS software offers benefits that have the potential for reaching a wide consumer base, expanding business operations, engage with new clients and build stronger teams. However, there are benefits of SaaS in cloud computing far greater than the ones mentioned here.

  • Lowered Cost

Companies don’t need to buy hardware to host applications, it is a subscription-based model. SaaS solutions have a monthly subscription which involves upgrades, maintenance, and client support, with no requirement of large up-front costs.

  • Quick Deployment

An on-premises software needs weeks or months in implementation. SaaS solutions just need a web browser and internet access and you are ready to go live! You thus get immediate access through SaaS.

  • Automatic Updates

Updates in SaaS are deployed automatically by the software vendor. SaaS solutions offer automatic and frequent updates as a part of the ongoing subscription charge. SaaS updates also include adherence to the latest security practices for higher information security.

  • No Infrastructure Requirement

SaaS vendor manages the complexity of the underlying IT infrastructure in SaaS. Companies aren’t required to maintain hardware or worry about which operating system version supports which database, the vendor takes care of all for them.

  • Scalability

SaaS doesn’t require users to buy another server or software in case of scaling up of the business. The SaaS solutions reside in cloud environment and are scalable. SaaS products can also be integrated easily with diverse technologies that is being used currently in your organization.

  • Anywhere Access

With internet access, SaaS solutions can be accessed from anywhere in the world. This provides mobility to the users, with the freedom to access data and work from anywhere and from any device including laptops, computers, tablets, or smartphones.

  • Backups and Data Recovery

SaaS in cloud computing eliminates the need of implementing the system for backing up the data in case of any contingencies. They have a system of automatic updates without user intervention. All your critical business data gets updated on third-part servers to ensure secure archival and recovery.

  • Integration

SaaS has this integration feature enabled that makes it well-connected with other SaaS offerings. All you need to do is enable the new SaaS offering and not go out to buy the new offering. The capacity of the server would also be taken care of by SaaS provider.

  • Information Security

Any organization’s information is more secure with a SaaS solution than stored on-premise in traditional systems. SaaS solutions come with data encryption and key data management technologies to ensure complete information security.

  • Long Term Customer Relationship

With reduced infrastructure costs, businesses can focus more on their sales and marketing efforts and ensure customer satisfaction. SaaS in cloud computing further ensures service delivery automation, so that you can enjoy all automation features uninterruptedly. There are minimal chances of downtime with SaaS products, leading to higher operational efficiency.

Challenges of SaaS Technologies

If not handled properly, SaaS can pose certain challenges to an organization in the long run. It is important to understand and analyze your business requirements before opting for a SaaS solution.

  • Unreliable Internet Connection: If your internet is strong, then there is nothing better than a SaaS cloud application. But if it fluctuates, it can be the biggest con. Although with high-speed internet and 5G connections available all around, this has become less of an issue.

  • Less Control: A SaaS application is completely managed by a third-party vendor. Even with the customizations offered to the user, the complete control still lies in the hands of the vendor only. In this case, the user may not get 100% of the desired features.

  • Security Risks: In SaaS, everything is managed and controlled by the vendor, which means even your confidential and sensitive data lies with them. Although the SaaS provider offers security, but you need to take a few actions from your end to secure your data.

  • Selecting The Right Subscription Plan: While trying a new application, we often select a monthly plan, which we may look cost-effective initially, but it is expensive in the long run. If you know the application will be used for more than a year, then it is cost-effective to choose an annual plan, otherwise there are options for a 6-month or 3-month plan.

  • Integration Issues: Wrong integration can cause a lot of trouble for your business. For instance, if the billing process encounters issues, it may generate incorrect invoices. It is imperative to have the sync of data between SaaS and other applications. Integrations are highly expensive and might require specialized IT professionals. So, you need to make sure that your SaaS application provides open APIs for seamless integration.

  • SaaS Saturation: With thousands of options available in the market, it is impossible for any IT team to select the right SaaS application. You can always go with recommendations and referrals but what can really help you are online reviews; they are unbiased and will always give you a clear picture.

  • Hybrid Infrastructure: When your on-premises or existing software work with cloud-based software like SaaS, it becomes a hybrid infrastructure. SaaS providers and your in-house IT team need to collaborate for integration, or you can hire a cloud consulting firm to do the work for you. Make sure that you take all the benefits of hybrid technology.

The Future of SaaS: Latest SaaS Trends

Well, everything in the future will ultimately come onto the cloud, and SaaS is just the beginning of it. The latest trends tell us that SaaS is here to stay for a long time!

  • Artificial Intelligence (AI): In 2021, significant developments have taken place in the AI industry, and experts predict that it will grow to a market size of $733.7 billion by 2027. Combining AI capabilities with SaaS can work wonders for business. Together, both have a great shining future ahead. AI can help SaaS become more personalized, speedy, secure and data intelligent.

  • Vertical SaaS: Vertical SaaS is completely customizable and focuses on targeting clients in a specific niche or industry like healthcare, logistics, or retail analytics. It helps organizations find a solution that is specific and specially designed to cater to their needs. It provides more business value, ensures industry-specific data governance and is cost-effective.

  • MarTech Trend: Marketing BI and data analytics are even letting non-graphic designers fulfill their needs for better branding and campaign management. Canva is one of the most popular examples of MarTech that offers free trials and easy billing which makes it accessible to small businesses as well.

  • Low-Code Platforms: No one wants to spend hours coding when developers have the option to build applications and websites with low-code platforms. This creates opportunities for many non-coders to join the SaaS industry. They can use visual programming, which is almost like drag, drop and create. This will not only bring more people to the SaaS industry but will also bring new application options to the market.

  • Migrating to PaaS: After customer acquisition, developers will now focus on customer retention, which will lead to the migration to PaaS. This will help startups in scaling up.

    For instance, an app can scale up geographically by using the tools on AWS to gain an edge over its competitors. Additionally, experts handle the cloud computing technicalities, allowing business owners to focus solely on their business’s creative and commercial aspects when they migrate to SaaS, thanks to all the customizable options and services available.

Top 10 SaaS Companies in India & Their Best SaaS Products

SaaS software has helped businesses and organizations build a strong infrastructure on the cloud and enjoy higher scalability and integration.

Power-packed integrations within the platform have helped businesses increase revenue, increase market reach and simplify daily operations. The top ten SaaS companies in India are:

  • Zoho
  • Agile CRM
  • IBSFintech
  • Freshworks
  • Playtonia
  • Facilio
  • Hippo Video
  • KlentySoft Inc
  • Paperflite

Know more about these top 10 SaaS companies in India, which are revolutionizing SaaS in cloud computing.


The popularity of SaaS solutions is growing because it eases deployment and decreases customer acquisition costs. With the SaaS model, vendors can support clients.

This approach allows companies to scale up fast by replacing costly infrastructure or adding IT staff. The subscription model can keep the IT costs consistent or lower than on-premises software.

SaaS in cloud computing is specifically preferable for small and medium sized businesses who are looking for lowering their upfront expenses. SaaS has thus become the need of the hour and more and more companies are adopting it.

Written by Somya Gupta

Somya is one of the most experienced technical writers in the team who seems to be comfortable with all types of business technologies. She is a sensitive writer who ensures that businesses are able to find the right technologies through her writings. She would leave no stones unturned... Read more

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