What is Software as a Service?

Article Written by: Michael RosengartenSubmitted by: CALBO Innovative Practices Committee

A quick definition of Software as a Service is as follows:

Software as a Service (SaaS) is a category of software services where the software application (i.e. permit tracking) is developed, hosted, and maintained by a third party organization and sold to a customer as a service, or utility. That is, you rent the software on a monthly or other predetermined basis. Your organization’s IT may still be involved but that is entirely dependent upon the vendor you buy from and the level of security you require. A SaaS product can be hosted in the cloud or on-premise.

What are the overall advantages of a cloud-hosted SaaS system?

  1. Access your software from anywhere. Your tablet, laptop, desktop, etc. Forgot something important to do at the office? No problem, do it from home.
  2. No software to install. Provisioning of new users becomes easy and can be done without IT.
  3. Reduce the need for expensive IT infrastructure. On-premise data centers, servers, and what comes along with that is expensive and is largely a thing of the past. Many SaaS providers host on Amazon Web Services, the same infrastructure Amazon.com runs on, which I believe is likely far more robust and reliable than your local data centers.
  4. Software updates roll-in more continuously and new features are often included with these updates. Part of what makes SaaS more expensive is that it comes with a different mindset: ship bug fixes, security fixes, and new features more frequently. Again, no IT required. And these updates come from the makers of the software who are presumably learning from many customers and sharing those benefits; as they learn of helpful features from one customer they can more quickly build and roll out that feature to other customers.
  5. More secure. Most of the time, cloud-based solutions are more secure. When new security vulnerabilities are made available online, SaaS vendors are quick to update their systems and that benefits all customers — whereas your agency will only patch those security hole when they find out about them, or worse have already been breached. A SaaS vendor can employ a single security expert that benefits hundreds of customers.
  6. You’ll likely get an Application Programmer Interface (API) which enables easy integrations with other modern software systems. Legacy, and especially on-premise systems, often do not have any API that allows plug-n-play integrations.

What are some disadvantages of a cloud-hosted SaaS system?

  1. SaaS generally doesn’t have an upfront maintenance cost. There’s no $400,000 one-time cost with a $50,000 one-time setup fee and a $25,000 maintenance fee. Instead, implementation, maintenance, hosting, and support is often baked into a single price on a monthly or annual contract. For these reasons, SaaS can seem more expensive upfront and in some cases can be depending on the needs of an agency.
  2. You lose some control. You may not want some of the new features or interface changes and depending on how the software is designed there may not be a way to turn unwanted features off for your agency. Similarly, most SaaS solutions do not allow you to “stick to a specific version or update.”
  3. You’re working in a web browser. Naturally, web browsers can have their own quirks and bugs and most SaaS is delivered via a browser. Your IT department will need to make sure your computers have modern web browsers with performant computers. As well, browsers are Internet dependent so you’ll need reliable Internet.
  4. Less local IT support. It can be challenging to pick a vendor that has excellent customer support including for you and your applicants (if your product has a citizen-facing component). Your IT team may not be very helpful given they don’t maintain the software.
  5. Data access. If you do not have access to robust reporting features in the SaaS solution, you can find yourself struggling to get direct database access and therefore may not be able to generate advanced or customized reports based on your data. This issue can also happen to on-premise and depending on IT restrictions, but at least you can buy a third-party reporting layer like Tableau to plug into your on-premise database.
  6. Data Retention. One of the biggest downsides to a SaaS product is that the databases are managed by the vendor. If there are not good data backup policies and the ability for you to export your data, you run the risk of losing data if the vendor goes out of business or has some other catastrophe.

Other notes on SaaS

  • SaaS does not require a cloud-hosted solution. SaaS implies the software is built and maintained by a third party vendor and usually does mean it is cloud-hosted but many SaaS providers enable their product to be run on a local environment (i.e. on-premise). Usually this is not a desirable for the vendor and they lose control over updating the software, fixing bugs, and patching for security issues. On-premise SaaS is often more expensive than cloud-hosted counterpart because in the cloud the vendor can maintain hundreds of customers on one installation (multi-tenant).
  • Multi-tenant is another term often seen with SaaS providers. Multi-tenant means you share resources with other customers. Multi-tenant is not necessarily more or less secure than single-tenant. Multi-tenant reduces the cost for the vendor to maintain the software and reach economies of scale. It is easier to maintain software when you have fewer versions out in the wild being used by customers — more customers will help identify issues and create one single product. Economies of scale are achieved by sharing resources; often it is the case that a single customer will never fully utilize the storage and processing power of computers today so enabling 5, 10, or even 100 customers to utilize the same storage power can reduce costs while have no negative effects to the customer.

For any questions regarding this article, please contact the Innovative Practices Committee.