Since the 60′ we have been watching the SaaS industry grow and become almost universal on the internet. First, with Concur, a business and expense software, then with Salesforce. In 2014 occurred the most significant acquisition the SaaS industry ever experimented, when SAP bought Concur for the mountainous amount of USD 8.3B. After, that it was everywhere.
The total size of the public cloud software as a service (SaaS) market from 2008 to 2020 (In billion US dollars)
Software as a Service?
The Software as a Service industry (SaaS) is composed of companies that offer software to their users using the internet. They usually charge a monthly or yearly fee for their services and have a tiered subscription business model to adapt to almost any budget.
Other names used to denominate the SaaS industry are:
- Web-based software
- On-demand software
- Hosted software
- Application Service Provider (ASP)
There is no software installation or hardware requisites beyond computer and internet access with the SaaS industry companies. All the services are available via most browsers and devices, anywhere, anytime, as long as there is an internet connection.
Examples of SaaS companies are:
- Email providers
- Transport and delivery providers: (Uber, Cabify, Rappy)
- Video on demand (Netflix, Amazon Prime, HBO Max)
- SAP Concur
- Google Workspace (Gsuite)
How does SaaS work?
The SaaS industry mainly relies on the Cloud Delivery model to deliver their services, which means the provider hosts their databases, networks, and computing operations in their servers.
The other model is the ISV, the software provider contracts space from a cloud provider to host the software in the provider’s data center.
The SaaS companies usually integrate different software using API, so there can offer flexible and complex solutions.
Using the multi-tenant approach, SaaS companies run on the cloud only one instance of the software for all users, allowing implementing updates, fixing bugs, and doing maintenance fast and efficiently instead of using multiple instances as IOS or Windows does.
This business model is budget-friendly because it often includes maintenance, compliance, security services, and saving money on IT, security, and hardware requisites, which can be time and money-consuming. They also offer support and customer service.
SaaS companies offer dynamic and out-of-the-box solutions, simple to set up, and different complex levels for different sizes and needs companies.
SaaS Pros and Cons
These are the main pros and cons of SaaS companies.
- Access to complex and problem-solving software, in the past very expensive
- Pay only for what you use. Different tiers for different sizes and needs
- Often offer free version software
- Employees flexibility: Your workforce can use the software anywhere, anytime.
- Information availability: The information is always available, independently of the location of your employees.
- You have to use outside vendors.
- Limited control and software flexibility, you don’t have access to the source code, so you can’t modify the software.
- Unwanted Changes: You are opened to unwanted software changes that can affect how you manage your companies.
The As-a-Service models
There are many cloud-running business models out there.
- IaaS: The Infrastructure as Service companies are cloud-space providers that offer storage services, hosting your networking, databases, and software.
- PaaS: The Platform as Service companies are software developing platform providers for developers and engineers to build their software.
- SaaS: Companies that host, support, maintain, and secure software.
History of the Software as a Service Industry.
The cost-efficiency, ease to use, functionalities, and third-party maintenance and security led the SaaS to experience exponential growth in the 2000′. But what happened before that?
In the early 60′, digital computing hardware technology was a very promising baby that took its time to grow. The cost and size, the engineering team, and the maintenance needed to run any mainframe were very expensive, therefore exclusive.
Personal Computer Era
The hardware considerably reduced its cost and size in the next three decades, so now, an individual could “own” a personal computer. The on-premise software made its appearance and, with it, the “intranet.”
On-premise was time-consuming and not scalable, and the IT departments were living a nightmare trying to install, update, secure, and maintain all the hardware and software. In this stage, the software business had a low earning margin due to the cost of the goods sold.
When the internet exploded in 1994, all the businesses associated with it also did. In 1995 Jeff Bezos launched Amazon and Pierre Pierre Omidyar AuctionWeb, now eBay, the first P2P auction marketplace.
Cloud Computing; The Rise of SaaS.
With the rise of the internet, cloud computing emerged; this allowed remotely hosted software to be installed on any computer with internet access. For the first time, the software reduced its amount of maintenance, and reach significantly increased. Software developers began to focus on core functionalities more than anything.
And saas, SaaS appeared.
Salesforce launched its customer relationship management platform (CRM) in 1991, the first SaaS solution on the market. At first, SaaS was only for start-ups and small businesses, and it was though too slow, unstable, and inflexible for bigger-sized companies. The subscription-based software business model wasn’t too appealing for the companies back then.
Nowadays, the SaaS industry is present in almost every business you can find in the market, using email providers, social networks, CRM platforms, etc. The exponential growth the SaaS industry experienced was rocket-fueled by the rise of the entrepreneurs and small businesses that now have access to sophisticated software to make complex operations. In the past, that was a luxury that only big companies could afford.
Why are SaaS important?
The Saas Industry pulled down from the sky and down the earth many services affordable to anyone, from freelancers and entrepreneurs to big companies like IBM, Microsoft, Oracle, or SAP. The level of automation of the SaaS helped the global market grow and create riches that everyone can enjoy today. You can buy a t-shirt from china or a MacBook from the United States using Amazon. The amount of SaaS, IaaS, and PaaS involved in that process is enormous. We don’t realize they are there is proof that the SaaS industry is doing a good job.
In the future, with the advance in AI technology, the integration in the market will be hand in hand with the SaaS, which will make available those technologies to all of us. The amount of software integration we’ll have in the future only the SaaS can manage.
The importance of the future of the business and the technology that the SaaS industry will have will be paramount.