Lionel Sujay Vailshery
Research expert covering cloud computing and emerging tech industries
Software as a Service - statistics & facts
Together with platform as a service (PaaS) and infrastructure as a service (IaaS), software as a service (SaaS) is one of the three primary tiers of cloud computing. It allows businesses to redirect resources away from IT hardware, software, and personnel expenses, and towards other business needs. Currently, the most prominent companies in the SaaS market are Microsoft, Salesforce, Oracle, SAP, and Google.
What does the SaaS model include?
Under the SaaS model, service providers sell customers access and use application software and databases through the cloud delivery model. The infrastructure, platforms, or operating systems, and often the granular details of the software, are concealed from the customer, who would typically connect to the service via a client program or web browser. Therefore, the customer is not responsible for maintaining the hardware or resources. The software provider will contract an independent software vendor to host the application and related data or otherwise host the application on its servers. Because of this, end-users are paying a per-user or per-use fee to the service provider to maintain access to the most up-to-date version of the software. This pricing model means that costs are flexible and scalable, allowing users to be added or removed as necessary and shielding the customer from the capital expenditure customarily required to establish new platforms, infrastructure, and licenses for software.
The global SaaS market
The global SaaS market generated some 197 billion U.S. dollars in revenue in 2023 – accounting for approximately two-thirds of the entire public cloud services market revenue. Although revenue growth for SaaS is not expected to slow down in the coming years, its share of the overall cloud services market is expected to decline in the face of cloud platform and infrastructure services growth. A mix of different users utilize SaaS applications, including business users, IT professionals, and personal users. There is therefore a broad range of products offered, notably advanced IT tools, file hosting services like Dropbox, or personal entertainment like Netflix.
SaaS products address various needs
Importantly, SaaS products are marketed to both B2B and B2C users, which is not the case for IaaS and PaaS products. This indicates some limitations and concerns attached to SaaS products. Businesses rely on many external vendors for their software and its management. This may compromise a user's ability to use SaaS offerings due to service disruptions or security breaches on the vendor's side. Furthermore, new versions of applications are rolled out to every customer, which may require organizations to invest in extra training. Finally, switching vendors can be challenging, as large amounts of data must be migrated.
