Software as a Service: Examples, Advantages and Disadvantages


What is Software as a Service (SaaS)?

Software as a service (SaaS) is a cloud-based software delivery model in which the cloud provider develops and maintains cloud application software, provides automatic software updates, and makes software available to its customers via the internet on a pay-as-you-go basis. The public cloud provider manages all the hardware and traditional software, including middleware, application software, and security. So SaaS customers can dramatically lower costs; deploy, scale, and upgrade business solutions more quickly than maintaining on-premises systems and software; and predict the total cost of ownership with greater accuracy.

SaaS is one of three main categories of cloud computing, alongside infrastructure as a service (IaaS) and platform as a service (PaaS). A range of IT professionals, business users, and personal users use SaaS applications. Products range from personal entertainment, such as Netflix, to advanced IT tools. Unlike IaaS and PaaS, SaaS products are frequently marketed to both B2B and B2C users.

In the early 2000s, the first generation of SaaS solutions was siloed, inflexible, and designed to solve a single business problem. Since then, SaaS has evolved dramatically. Today, modern cloud applications can span—and connect—everything from financials, human resources, procurement, and supply-chain processes to commerce, marketing, sales, and service solutions. Other benefits of a modern, complete SaaS solution include:

Benefits of SaaS

Software vendors spent the last several years bombarding IT professionals and business executives with messages about the advantages of cloud computing in its various forms. Some of these messages targeted the accountants and number crunchers by discussing the advantages of operating expenses (OpEx) compared with capital expenditures (CapEx). Others targeted the IT community with messages about scalability, on-demand capacity and the cloud's ability to take over the mundane tasks of infrastructure management and allow IT talent to focus on business problems.

There is a great deal of truth to each of these arguments, but little energy has been devoted to explaining to LOB managers why business applications delivered in the cloud via the SaaS model and paid for on a subscription basis not only make a great deal of sense, but are key to bridging the innovation gap executives often complain about to their IT organizations.

SaaS is not a new concept. In fact, web-based applications delivered by application service providers (ASPs) actually pre-date the "cloud computing" concept as we know it today. Early applications delivered using the SaaS model often focused on sales force automation (SFA), customer relationship management (CRM) and web content management. Today Oracle delivers an entire suite of business applications for enterprise resource planning (ERP), project portfolio management (PPM), planning and budgeting, financial reporting, human capital management (HCM), talent management, sales and marketing, customer service and support, social networking, social marketing, and social engagement and monitoring.

Unlike those offered by many of the first-generation ASPs and other SaaS vendors, Oracle's SaaS business applications are modern and next-generation and backed by the Oracle name as well as the billions of dollars it has invested in software development and infrastructure to build and deliver its applications. If you’re a line of business manager looking to get your hands on the latest capabilities without the headache often associated with hefty upgrades, let's dive in and explore the benefits of SaaS applications.

Examples of SaaS

Google Docs

Launched in 2021, Google Docs is Google's free online word processor where individuals just need to log in through a web browser for instant access. Google Docs allows you to write, edit, and even collaborate with others wherever you happen to be.


Founded in 2007, Dropbox is a cloud storage service that lets businesses store, share, and collaborate on files and data. For example, users can back up and sync photos, videos, and other files to the cloud and access them from any device, no matter the location.

SaaS expanded and today supports home offices and entertainment daily as users log on to Netflix, Zoom, DocuSign, Adobe, Shopify, and Slack.

Advantages and Disadvantages of SaaS


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. It is easy to implement, easy to update and debug, and can be less expensive than purchasing multiple software licenses for multiple computers.

SaaS has numerous applications, including email services, auditing functions, automating sign-up for products and services, managing documents, and Customer relationship management (CRM) systems, a database of client and prospect information. SaaS-based CRMs can be used to hold company contact information, business activity, product purchase history, and sales leads.

The SaaS model works well for enterprise-level services, such as human resources. These types of tasks are often collaborative, requiring employees from various departments to share, edit, and publish material while not in the same office.

Accessible from anywhere


Easy to implement, update, and debug

Easy to scale

SaaS removes the need for organizations to install and run applications on their own computers or in their own data centers. This eliminates the expense of hardware acquisition, provisioning and maintenance, as well as software licensing, installation and support. Other benefits of the SaaS model include:

Flexible payments. Rather than purchasing software to install, or additional hardware to support it, customers subscribe to a SaaS offering. Transitioning costs to a recurring operating expense allows many businesses to exercise better and more predictable budgeting. Users can also terminate SaaS offerings at any time to stop those recurring costs.

Scalable usage. Cloud services like SaaS offer high Vertical scalability, which gives customers the option to access more or fewer services or features on demand.

Automatic updates. Rather than purchasing new software, customers can rely on a SaaS provider to automatically perform updates and patch management. This further reduces the burden on in-house IT staff.

Accessibility and persistence. Since SaaS vendors deliver applications over the internet, users can access them from any internet-enabled device and location.

Customization. SaaS applications are often customizable and can be integrated with other business applications, especially across applications from a common software provider.


Drawbacks to the adoption of SaaS center around data security and speed of delivery. Because data is stored on external servers, companies must ensure it is safe and cannot be accessed by unauthorized parties.

Slow Internet connections can reduce performance, especially if the cloud servers are accessed from far distances. Internal networks tend to be faster than Internet connections. Due to its remote nature, SaaS solutions also suffer from a loss of control and a lack of customization.

What are the challenges and risks of SaaS?

SaaS also poses some potential risks and challenges, as businesses must rely on outside vendors to provide the software, keep that software up and running, track and report accurate billing and facilitate a secure environment for the business's data.

Increased security risks

Slower speed

Loss of control

Lack of customization

Issues beyond customer control. Issues can arise when providers experience service disruptions, impose unwanted changes to service offerings or experience a security breach -- all of which can have a profound effect on the customers' ability to use the SaaS offering. To proactively mitigate these issues, customers should understand their SaaS provider's SLA and make sure it is enforced.

Customers lose control over versioning. If the provider adopts a new version of an application, it will roll out to all of its customers, regardless of whether or not the customer wants the newer version. This may require the organization to provide extra time and resources for training.

Difficulty switching vendors. As with using any cloud service provider, switching vendors can be difficult. To switch vendors, customers must migrate very large amounts of data. Furthermore, some vendors use proprietary technologies and data types, which can further complicate customer data transfer between different cloud providers. Vendor lock-in is when a customer cannot easily transition between service providers due to these conditions.

Security. Cloud security is often cited as a significant challenge for SaaS applications.

SaaS Security

As companies adopt cloud-based models for software products, concerns arise regarding security and privacy. Where management was once responsible for the updates on in-house software, corporations now must rely on third-party management of their encryption, identity and access management (IAM), data privacy, and downtime or incident response. They must also depend on an adequate level of communication with technical assistance.

SaaS Pricing

A SaaS product is commonly more cost-effective for a company than a traditional software license, as setup and installation are not needed. SaaS providers rely on subscription-based pricing models for customers such as tier-level pricing per person or group or a flat rate annual fee. Users may also choose an ad-based model where the SaaS earns revenue through advertising within the cloud space.

The Bottom Line

SaaS or Software as a Service uses cloud computing to provide users with access to a program via the Internet. Without having to install software in-house, SaaS allows each user to access programs typically through a subscription service. SaaS has many business applications, including file sharing, customer retention management, and human resources, and is used by applications such as Netflix, Slack, Dropbox, and Google Workspace.

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