SaaS, also known as Software-as-a-service is simply using software through an internet connection. It is a characteristic of cloud computing, which is responsible for one of the largest areas of business development. The applications created by SaaS can only be run online. SaaS has had a greater impact on digitalization and in the business sectors as well. The paper delves into this delivery model and highlights the aspects that have led to the solidification of SaaS in the market. It also shed light on how the SaaS industry has taken a hit in the pandemic. By the end, the major characteristics of SaaS can be understood.
Software as a service is a software distribution model in which users can connect and use cloud-based apps over the internet. It is one of the categories of cloud computing, in which the other two are IaaS or infrastructure as a service and PaaS or platform as a service. The applications using SaaS as a software model run on the SaaS provider’s servers. SaaS applications are often referred to as on-demand software, web-based software, or hosted software. The SaaS provider manages access to the application that includes performance, availability, and security. The SaaS applications are typically accessed via web browsers. It is estimated that the SaaS industry’s market capitalization is expected to be $143 billion by the end of the year 2022. From multinational companies to small start-up businesses, SaaS is being implemented everywhere. Organizations can easily integrate SaaS applications with other software using application programming interfaces, also known as APIs. It is not long before the entire market is using SaaS applications. In fact, it is estimated that by 2025, 85% of the business applications will be SaaS-based.
The answer to this is the presence of certain characteristics that a typical SaaS delivery model possesses. These characteristics include a multitenant architecture, providing improved access to data, easy customization, and usage of consumer web. SaaS trends have also helped in changing SaaS from a standalone software functionality to a platform for mission-critical applications.
SaaS as Digital Adoption Digital transformation or digitalization has reshaped the functioning of any industry. Digital adoption is not just about creating an application or having accounts on different social media platforms. A digital adoption platform is when the whole business or organization goes digital.
It is about software implementation in every aspect of the work. Many companies and organizations have adopted SaaS to transform businesses digitally. The simplification and process optimization have become more repetitive when using SaaS. This has helped tremendously in the customer onboarding of any business.
In the SaaS model, the technology is the central aspect, hence the impact is much more potent. SaaS for digitalization has helped in improving the cost structure of a business. It has played a pivotal role in making businesses with small budgets scalable.
Implementation of SaaS as a delivery model in many companies has led to greater advantages. It has been effective in all major sectors and industries and has been a helping hand in boosting up the economy of a country.
Nowadays, all the developed countries and the majority of the developing countries have been seen to adopt SaaS as a way of digitalization.
Some of the benefits of SaaS include:
• Cost-effective: Money is the end goal of every business and financial growth is their priority. SaaS is seen to provide beneficial cost savings by eliminating the costs that a user has to pay in advance for purchase and installation. One of the characteristics of SaaS is that it uses a multitenant environment. This has proven to be useful as this type of environment has low hardware and software license costs as compared to the traditional models.
Other than that, the pay-as-you-go model of SaaS allows businesses to save money as they only have to pay for the software they are using. This also prevents the wastage of money on unused licensing.
• Time Savers: In every business, time is money and money is time. Along with being cost-effective, SaaS also helps in time management. As the software is already installed and configured, one can simply provision the server for an instance in the cloud. In a few hours, the application is ready to use. This saves the time that is used for installation and configuration.
Additionally, in the SaaS delivery model maintenance responsibilities are shifted to the vendors unlike in traditional models where the company has to work for the maintenance as well. This has helped majorly in eliminating extra work hours required to upgrade the standard software of any business.
• Accessibility and Scalability: The flexibility of the SaaS delivery model has made it scalable for small businesses and companies. SaaS is accessible anywhere in the world given its web-based use. You can complete your work, start a business, or input data from any part of the world, provided you have a strong internet connection. Hence, SaaS has been extremely beneficial in encouraging a hybrid workforce.
Revolution in technology has made a significant impact on the betterment of industries. Digitalization has been effective in improving the economic factor of any sector, industry, or country. Cloud computing applications are one of the best options for digital adoption. To fully optimize the effectiveness of the growth, many businesses have chosen these applications. Among the applications, SaaS platforms offer a consolidated experience across and among all applications. They simplify interdepartmental communications.
We already know how important SaaS is for any organization. But it is seen that not every office or company is using this application. The CEO of Oracle, Mark Hurd, believed in the consolidation of SaaS. He implored that the B2B applications market was valued at $125 billion in 2020, out of which 70 percent represented back-office applications and 30 percent represented front-office applications. He believed that majority of the offices in this market managed their applications on-premises rather than using cloud-based apps.
Businesses not adapting to modern technological methods have lower chances of survival in the market. Cloud computing services are one of the most efficacious technological methods of digital adoption. SaaS, along with other applications has full access to data from a range of applications that helps a business in better decision-making. They offer cost-effective and time-saving integration of all products, including human capital management and enterprise resource planning, in both front and back-office operations.
Now it depends if a business or an organization is adopting SaaS or not. Small scale businesses fail to implement SaaS applications due to a lack of funds to invest in such modern capabilities. Due to this, the organizations will not sustain in the market, as SaaS- adopted organizations gain more success and momentum. This will eventually result in industry-wide consolidation of SaaS as the small-scale businesses will be absorbed by the bigger companies.
This results in merging of the most of the organizations leading to a reduced number of suite providers towards the end. According to the reports, 6250 data centers in the United States of America were closed as of August 2018. Consolidation of SaaS has resulted in a smaller number of data centers and reduced segmented applications. There is a demand for a SaaS delivery model, and since not every company can manage to adopt it, larger companies are seen to acquire smaller companies in multiple business areas. This is the consolidation of SaaS through acquisitions.
SaaS-based platforms are unified for greater advantages. The SaaS-based delivery model allows access of data to all the people in any organization ensures that everybody is well-informed and significant decisions are taken based on that. In this way, companies are increasing their percentage of SaaS revenues, leading to consolidation in this field. Many companies did just that. Based on reported cloud revenues, IBM earns around $600 million for its cognitive services group that includes Watson and other analytics.
Here are some of the company's estimated revenue generated by the implementation of the SaaS delivery model. The data is mostly estimation.
Company Estimated revenue generation by Cloud computing services (yearly):
Microsoft $14 billion
ADP $1.15 billion for SaaS services
QuickBooks Online $662 million
Oracle $878 million for SaaS and PaaS services
Dropbox $1 billion
Pandemic has been a tough time for all of us. The Covid-19 brought a multitude of problems with it. From social to economic, all kinds of environmental factors were affected by the pandemic.
The SaaS industry is yet another industry among others that have been impacted by Covid. But guess what? The impact was a positive one. In fact, one can say that the SaaS industry has been unaffected by the pandemic.
One of the prime reasons for this is that the stock market for SaaS development and Cloud Solutions Companies has been high every time. Hence, most of the venture capitals have been able to raise funds easily with increased liquidity.
Moreover, digital adoption has increased in the pandemic with many people working from home and using technology. This has led to an uprise in the utilization of SaaS. As the work from home culture has amplified in the pandemic, the transition from office to home has been smooth, due to cloud computing. Although, there has been some financial down growth in many companies, yet the cloud has helped these businesses in having hope for increased productivity and efficiency.
As compared to the trillion-dollar software market, the growth of SaaS technology in the market is still as little as $100 billion. But it is expected to grow in the future years. The adoption of 5G has played a significant role in the adoption of SaaS technology. The wireless 5G networks allow businesses and individuals to onboard popular SaaS products at a fast rate. It is estimated that 5G will be covering the world's 65% population by 2025.
SaaS has helped in increasing the productivity of businesses in the market by eliminating problems of software maintenance and incompatibility. It also allows streamlined focus. SaaS had a positive impact on the IT services market. It has brought complicated technology products into the reach of companies and organizations. The SaaS products have remarkably raised the bar for functional and data offerings of many legacy products. SaaS products have also helped in attaining positive customer feedback and gaining customer loyalty as the customers who made investments in the SaaS products have huge profits and this has convinced the decision-makers to invest in these custom solutions.
Other than that, many industries like banking, business services, manufacturing, retail and the government are using SaaS products. This has made this delivery model popular and led to recurring revenue generation the services.
SaaS has made a distinguishable impression in the market and it is continuing to do so. Strong predictions are being made that there will be a growth of the SaaS industry with a revenue generation of $354.6 billion by 2022.
Hence Software as a Service has a lot to offer. If it is used properly by organizations and companies, SaaS can help in cost-saving, time-saving and human resources in multiple businesses.
There have been some recent advancements in this sector as well. Micro SaaS which is also known as the SaaS add-ons created to complement existing SaaS solutions or resolve minor software needs is in huge demand. There also has been a rise of vertical SaaS in the market.
Both micro and vertical SaaS are set to proliferate in the future and significant developments will be seen regarding the look of companies while competitively pricing their services. Every product has a good and a bad side, so does this. Insufficient data security, large data mobility, and low performance are some of the negative feedbacks of the SaaS delivery model.
Hence, it is right to believe that a software will grow, only if people believe in it and work hard to bring it to the market.
Otherwise, it will be just like a soft toy is for children; to play at the moment and discard when new products are available in the market.