You use SaaS every day without calling it that — email, online accounting, video meetings and project boards are all examples. This guide explains what SaaS means, why businesses love it and how the model works.
SaaS in one sentence
SaaS (Software as a Service) is software delivered over the internet and paid for by subscription, instead of being installed once on your own machines.
How SaaS works
- The provider hosts the software on cloud servers.
- Customers log in through a browser or app and pay monthly or yearly.
- The provider updates, secures and backs up the product for everyone.
- Many customers share the same application, with their data kept separate — a design called multi-tenancy.
SaaS vs traditional software
| SaaS | Traditional software | |
|---|---|---|
| Payment | Subscription | One-time licence |
| Installation | None — use in browser or app | Install and maintain yourself |
| Updates | Automatic | Manual upgrades |
| Access | Anywhere with internet | Often tied to a device or office |
| Upfront cost | Low | Higher |
Common SaaS examples by type
- Sales and customer tools: CRM, helpdesk, live chat — see our CRM example.
- Operations: billing, inventory, HR and payroll — see billing and HR examples.
- Collaboration: project management, document sharing, video meetings.
- Marketing: email, social scheduling, analytics.
- Industry software: clinic, school or hotel management.
How SaaS companies make money
| Pricing model | How it works |
|---|---|
| Tiered plans | Basic, Pro and Business with more features at higher prices |
| Per-user | Price per team member per month |
| Usage-based | Pay for what you use — emails sent, storage, API calls |
| Freemium | Free plan with paid upgrades |
Key numbers SaaS teams watch: MRR (monthly recurring revenue), churn (customers who cancel) and activation (new users who reach their first success).
Benefits for customers
- Low upfront cost and quick start
- No servers or installation to manage
- Always up to date
- Easy to scale users up or down
Drawbacks to consider
- Ongoing fees add up over years.
- You depend on the vendor’s uptime and decisions.
- Customisation may be limited.
- Data portability can be restricted — check export options.
Thinking of building SaaS?
The most successful SaaS products solve one narrow problem for one audience, start with a small MVP and grow from real usage. Follow our step-by-step SaaS MVP roadmap, validate your idea first and see the cost guide.
Build your SaaS with us
We design and build SaaS products from MVP to scale. Explore our SaaS development service or get a free quote.
