Software-as-a-service, often contracted to ‘SaaS’, benefits consumers and businesses around the world daily. As one of the three constituents of
cloud computing – infrastructure-as-a-service (IaaS) and platform-as-a-service (PaaS)
being the other two – SaaS, delivers software and applications over the internet, via a subscription model. This, in a nutshell, is what the suffix, “as-a-service,” alludes to.
The SaaS innovation is revolutionary. Before it, users had no choice but to manage, install and upgrade software themselves – on local computers and servers. If a business did not possess the necessary skillset to do this in-house, challenging operational
bottlenecks would be created. Thanks to SaaS, applications can be pulled from the cloud and deployed within hours.
The innovation is so popular now that, according to Medium,
71% of companies, globally, rely on it.
Scenarios and vendors
For consumers, the most common examples of SaaS are email providers, such as Outlook, Microsoft Office tools; or music streaming platforms, like Spotify. Other familiar names include Dropbox, Google Docs, MailChimp, Netflix, Slack, and Zoom.
For financial firms, SaaS is used in all kinds of areas, such as billing, communications, customer relationship management (interestingly, Salesforce’s CRM platform of 1999 was the
first ever SaaS solution built from scratch), enterprise resource planning (ERP), financial management, human resources, sales management, and more.
Ultimately, SaaS is about the delivery of applications over the internet.
How it works
In comparison to IaaS and PaaS, SaaS has a high level of abstraction – making it the top of the three stacks. A SaaS provider will offer and maintain all the requisite stack layers, including applications, data, run-time, virtualisation, and
any hardware.
In practice, users access SaaS applications within what is known as a ‘multi-tenant architecture’, meaning all subscribers access the same pool of resources within the stack. While the hosted servers and environment are the same, each user benefits from
its own space to securely store data.
The pros
Unlike the traditional software management approach, SaaS is cost effective, since it eliminates IT overheads by circumventing the need for in-house specialists, while maintenance and management is conducted over the internet. What is more, the subscription model of SaaS (monthly or annually) enables firms to spread their outgoings and pay only for what they use.
Another benefit of the SaaS model is that recipients automatically get the latest version of the software. There is no need to dedicate resources to application updates, patching, downloads, licensing, or other elements. All is upgraded over the cloud, by
the provider, and version control and system compatibility are maintained.
There’s built-in horizontal and vertical scalability, too. If, for example, more databases need to be added, or computational power must be pulled in, SaaS providers can do this on-demand and at speed.
Finally, access is broadened with SaaS – a useful advantage in a world increasingly populated by remote workers. To benefit from SaaS, end-users require only internet connectivity and a web browser. No plug-ins or installation is necessary.
For financial institutions, SaaS integration promises to drive
payment modernisation – by encouraging adoption of Confirmation of Payee, for instance – and
customer-centric innovation.
The cons
Some of the drawbacks to SaaS access come from the regulatory sphere. In Europe, for instance, the General Data Protection Regulation (GDPR) privacy
law compels constituents to hold their data in the same place as their work. This limits the extent to which the remote benefits of SaaS can be exploited.
Furthermore, due to the increased accessibility afforded by SaaS, stronger-than-usual access controls are necessary. Since a firm’s assets no longer sit within the internal network; anyone with the right credentials and an internet connection could in theory see them. As such, verifying user identity is crucial.
Some financial institutions may feel uncomfortable at the idea of being overly reliant on a single IT provider – and that is understandable, especially if security and compliance is outsourced, wholesale. Should things go wrong, moving over a whole database to another provider is time-consuming and costly. Such a dependence can result in dreaded ‘vendor
lock-ins’.
Trends to watch
With the SaaS market having exploded and showing no signs of slowing – going from $237.48 billion in 2022 and projected to hit $908.21
billion by 2030 – there is limitless application potential.
Banks’ cybersecurity, for one, may be greatly enhanced through the deployment of SaaS alongside artificial intelligence (AI). Leveraging analytics and machine learning in specific scenarios promises to bolster institutions’ defense against cyberattack.
There is also the
payments-as-a-service arena, which is already revolutionising the way businesses process payments, by seamlessly connecting groups of international payments systems.
And that’s not to mention SaaS for the customer segment – with its potential to deliver new generative AI-powered products as seismic as ChatGPT.
For the foreseeable future, software-as-a-service will remain the most industry-shaping component of cloud computing. By 2025, almost
half the world’s data will be stored there.