Software as a Service (SaaS)

Software as a Service (SaaS)

Subject – Science and Tech

Context – Recently there was news that Freshworks — a Chennai- and Silicon Valley-based Software as a Service (SaaS) provider has filed for IPO in the US.

Concept –

• SaaS is a way of delivering software applications over the internet when a customer requires them.
• Earlier, companies would have to install software in their clients’ localised hardware for them to use their applications. So, this required customers to pay for use of the software upfront, and also for the hardware on which the software would run.
• SaaS, which started as a concept during the dotcom boom, began to flourish as a business model after the financial crisis of 2007 as companies looked to save costs.
• At a personal level, the Microsoft Office 365 suite of products is a good example of SaaS. Instead of purchasing multiple one-time licences at a hefty cost, users can opt for a more affordable monthly subscription of the entire suite based on requirements. Users can also make do with basic hardware, while saving data on the cloud.
• One can view SaaS as a subset of cloud computing. Cloud or cloud computing is a broader concept that involves not just delivering software over the internet, but also providing computing and data storage services from a different location (owned or third party).

Why is it important?

• The biggest advantage that SaaS enables is innovation.
• It has basically converted fixed costs of companies into variable costs. When capital is scarce, the SaaS model frees up capital for more high priority requirements.
• The payment model for SaaS is typically a per seat, per month charge based on usage. This ensures more efficient allocation of capital, especially for early-stage companies.
• This also implies that the threat for established companies is higher today. If they are not alert, it’s just a matter of time before SaaS-using start-up will outwit them.