What is SaaS? 

What does the phrase SaaS stand for, and what does it mean? We look at what “Software as a Service” means, and how it applies to solutions such as HR systems.

John Crowley • 
What is SaaS?

You probably see the term “SaaS” thrown around quite a lot. If you’re in the market for a new HR system, then phrases like “SaaS-based HR software” will come hurtling your way at every turn. But unless you know what it means, then it’s a pretty useless phrase! 

So, let’s start with the basics.  

What does SaaS mean? 

SaaS (often spoken out loud as “sass”) stands for “Software as a Service”. And in a nutshell, it refers to any type of software that you access online – normally through a monthly or annual subscription. 

Generally speaking, you’ll only usually see the phrase “SaaS” used to describe business software, such as payroll systems, email marketing systems, CRM systems or HR systems. But actually, the definition covers any online software subscription.  

Yes, that means your Netflix subscription, technically, is a SaaS-based solution – although it’s highly unlikely that they’ll ever describe it as such. 

Other common terms that tend to carry the same meaning as “SaaS”, are “cloud-based”, “browser-based”, or simply “online”. You’ll normally access SaaS-based systems via your internet browser or a mobile app, and you won’t normally need to install any special software on your own computer. 

A brief history of SaaS 

Despite many modern companies describing their software systems as “SaaS”, it’s not actually a new concept at all. In fact, the very first SaaS-type system was operating way back in the 1960’s! Back then, it was called a “time sharing system”, which to me conjures up images of dodgy sales people trying to flog a week-long stay in an overpriced studio apartment in Malta – and is possibly one of the reasons it never quite caught on. 

SaaS-based (or cloud-based) software systems only really started to gain any sort of traction during the dot-com boom of the 1990’s, as businesses began to realise the benefits of freeing up local storage in favour of services that could be accessed via the internet. However, even in the 90’s, SaaS-based HR software was still a bit of an unknown mystery for most organisations – and this is probably because the concept of HR software in general was still a relatively new thing.  

The first mainstream HR system was launched around 1987, and although it was revolutionary for its time, it was a complex, locally-hosted system – the polar opposite of SaaS. It required a lot of local storage, a dedicated internal IT resource for implementation and maintenance, and it carried a huge upfront cost. This, of course, meant that HR software remained unavailable for most businesses, who continued to manage employee information on paper files or spreadsheets.  

By the early 2000’s, however, some forward-thinking SME’s had began to realise that they could access powerful HR software without having to take out a bank loan or build gigantic server rooms – and even though many companies continued using resource-intensive on-premise HR solutions, the rise in popularity of SaaS-based HR solutions throughout the 2000’s saw a huge shift in attitude, and a massive opportunity to level the playing field for small and medium-sized businesses. 

If we skip a few years, we get to where we are today – a world where SaaS-based systems are not only widely-adopted, but they are the norm. Even in huge organisations who have the resources and the server rooms required to run on-premise solutions, SaaS is now the preferred option for the majority. 

The benefits of SaaS vs on-premise solutions 

It’s all well and good to say “people started using SaaS, and that was that” – but to really understand what SaaS means, and why it became so widely adopted as a model for business software, you need to get under the hood of what set it apart.  

Cost is an obvious factor – organisations without easy access to large upfront capital could suddenly get on the enterprise software ladder and compete with the big players. But there are other benefits, too. 

  1. Lower total cost of ownership. SaaS solutions didn’t just save money on the upfront purchase – they made the lifetime of the software subscription cheaper, too. Companies no longer had to pay an internal IT department to manage the installation, deployment, maintenance, updates, etc. SaaS-based systems are updated in the cloud, and often in a way that has little to no downtime on productivity – whereas on-premise systems could be out for hours, or even days, while bugs were fixed or updates were deployed locally. The monthly subscription for a cloud-based system almost always beats the ongoing monthly costs associated with managing and maintaining a locally-installed on-premise solution. 
  1. Faster time to market. SaaS-based solutions require very little in terms of deployment. Sure, you may have to load your data into the database to kick things off – and you may even need to spend a little time working out how to make the most of the functionality. But in terms of actually getting started, you’re ready to go on day one. No installation, configuration, or any of the traditional stumbling blocks that would often require weeks of planning with a traditional on-premise solution. 
  1. Scalable pricing model for growing businesses. One of the biggest benefits that catapulted SaaS to the front of the queue, was the way most products allow users to increase or decrease their usage on a flexible and on-demand basis. For example, a small start-up may only require the most basic of features, with a minimum number of users – and they can select the package that reflects this. But over time, they can increase the features they need access to, and increase the size of their contract as their headcount grows.  
  1. Better data security. One of the biggest benefits of the SaaS model, is the security benefits when it comes to looking after your most sensitive data. As long as your select a trustworthy and competent supplier, their security processes are likely going to be far stronger than anything a small business can manage during their early start-up days. What’s more, there are rules and regulations in place that software suppliers must follow in order to be able to process your sensitive data – so instead of hiring a team of security experts to bug-test your server room, you can simply rely on the security credentials of your software supplier. 
  1. Reduced risk. Because SaaS-based HR software (and other types of software) are subscription-based software models, there is little-to-no risk for smaller businesses who do not yet know whether they are going to succeed. With no up-front cost, or infrastructure requirements, start-ups can get the full arsenal of tools they need, with the knowledge that if their great idea fails, they can simply cancel their subscriptions.