All Software as a Service (SaaS) solutions share three things in common, regardless of the type of application – whether it’s customer relationship management (CRM), electronic resources planning (ERP), computer-aided design (CAD), or augmented reality (AR):
- Licensing model: Customers pay on a subscription or consumption basis.
- Deployment: The software is owned, delivered, and managed in the cloud by a third party.
- Architecture: One set of common code and data definitions is consumed in a one-to-many model.
Licensing: Perpetual vs. Subscription
With Subscription, you access software licenses in a pay-as-you-go model rather than purchasing the software through upfront costs. Since the customer can cancel after short term contracts, the vendor is more committed to customer success. Subscription models lower upfront costs and provide predictable budgeting for businesses.
The software industry has been ahead of the broader trend towards subscription because their products are increasingly digital and connected.
Deployments: On-Premises vs. Cloud Hosted vs. SaaS
There are three general categories of deployment: On-premises, cloud hosted, and SaaS.
On-Premises
On-premises is the classic deployment model. This deployment model has been used ever since the creation of software. With on-premises solutions, the hardware and software users are co-located. The customer of an on-premises solution is responsible for managing the hardware, the operating system, and managing the software application in question. Tasks include installing, updating, and upgrading.
Cloud Hosted
A cloud hosted deployment requires that the hardware be managed by a third party. This is often referred to as infrastructure as a service (IaaS). Cloud hosted deployments can come in many forms, depending on how much additional services are provided. For example, the term platform as a service (PaaS) implies that the middleware and operating system are also managed by the vendor.
Software as a Service (SaaS)
With SaaS, all of the resources and effort required to ensure the hardware, middleware, and application are up-to-date/operating efficiently is managed by the vendor as a service. The SaaS deployment model single handedly provides impressive benefits in terms of cost, ease of use, and go-live agility. More importantly, this deployment also enables new software architectures – which often deliver major transformation benefits to the customer.
SaaS-Enabled Architectures
Multi-Tenancy
Multi-tenant architectures enable many of the benefits of SaaS. With a multi-tenant architecture, all SaaS customers use the same version of the software and share a common hardware infrastructure to execute their computing tasks. Despite being on the same software version and utilizing the same hardware environment, each instance (or tenant), in a multi-tenant architecture is logically isolated from the rest. This means individual customer data is secure and customers can manage certain things to meet their needs – like user provisioning and software configuration.
Non-Relational Databases
Non-relational databases are another technology that’s often employed in SaaS solutions. With traditional data management systems, files are only able to be edited one user at a time. On the other hand, with a non-relational database, more than one user can edit documents or data concurrently. For example, in CAD applications, this allows engineers to work on the same design in parallel. Any edit made by one user is seen by all users simultaneously. This enables immense new opportunities for collaboration and innovation.
The Unmatched Benefits of SaaS
The combination of the SaaS deployment model and SaaS enabled architectures provide users with numerous benefits that are unmatched by other deployments. These can be organized into three categories:
Collaboration
All SaaS functionality is in the cloud, meaning teams can access applications and data from anywhere with any device. Users can be local, distributed, or highly mobile – while continuously executing tasks quickly and efficiently. Combining this mobility with the simultaneous editing of a non-relational database enables unparalleled collaborative capabilities.
Innovation Velocity
The multi-tenant architecture of SaaS solutions means the software and hardware is ready when you are, without installation. You can also quickly and easily scale to meet varied needs of your organization, thanks to this same underlying technology. Furthermore, because of the fact all customers are on the same software version, SaaS vendors can focus their resources to increase the value and frequency of updates that benefit all users.
Total Cost of Ownership
By consolidating the costs of maintenance, hardware infrastructure, and IT overhead across all end-users, SaaS vendors are allowed to leverage vast economies of scale to deliver a better software experience at a lower total cost of ownership.
SaaS Adoption Across Enterprise Software Markets
Although SaaS options are new to industrial organizations, the technology has been around for nearly two decades. Only over the past decade, SaaS has been widely adopted in enterprise software markets – starting in areas where the challenge of integrating core application functionality with SaaS architectures was easiest to overcome.
Today, SaaS represents over 80% of customer relationship management (CRM), over 70% of human capital management (HCM), and nearly half of enterprise resource planning (ERP) software deployments by revenue. SaaS adoption accelerated in these markets once an option was presented that managed to compete with established solutions, while also introducing additional SaaS enabled benefits.