SaaS — Software as a Service — refers to software delivered over the internet on a subscription basis, rather than purchased outright and installed directly on a computer. It's become the dominant model for how most businesses now access software.
Instead of buying a software license and installing it locally, users access SaaS products through a web browser (or a lightweight app), with the actual software running on the provider's servers. The provider handles hosting, maintenance, updates, and security centrally, while customers pay an ongoing subscription instead of a one-time purchase price.
Email platforms like Gmail, project management tools like Asana or Trello, customer relationship management systems like Salesforce or HubSpot, and communication tools like Slack are all familiar SaaS products — accessed through a browser, updated continuously by the provider, and paid for through recurring subscriptions.
No installation or local maintenance. Users simply log in through a browser, with no software to install, update, or maintain locally on their own machines.
Automatic updates. New features and bug fixes roll out centrally and immediately, without requiring users to manually download and install updates themselves.
Accessibility from anywhere. Since SaaS runs in the cloud, it's accessible from any device with an internet connection, rather than being tied to one specific installed machine.
Lower upfront cost. Subscription pricing spreads cost over time instead of requiring a large upfront license purchase, making software more accessible to smaller businesses.
SaaS businesses typically rely on recurring subscription revenue, which creates strong incentives around retention and customer success — a SaaS company's revenue depends heavily on customers continuing to subscribe over time, not just on the initial sale, which shapes how these businesses approach product development and customer support.
SaaS requires an internet connection to function, and ongoing subscription costs can add up to more than a traditional one-time purchase over a long enough time horizon. Data typically lives on the provider's servers rather than locally, which raises legitimate questions about data control and portability that some businesses weigh carefully before committing to a specific SaaS product.
SaaS delivers software over the internet on a subscription basis, with the provider handling hosting, maintenance, and updates centrally. It's become the dominant software model for most business and consumer use cases because of its accessibility, lower upfront cost, and continuous improvement — though the tradeoffs around ongoing cost and data control are worth genuine consideration.
The economic model behind SaaS is what distinguishes it from older software delivery, beyond just "it runs in a browser." Traditional software was a one-time sale — the vendor's revenue came entirely from the initial purchase, with maybe a paid upgrade every few years. SaaS revenue is recurring and tied to ongoing usage, which fundamentally changes the vendor's incentives: a SaaS company only keeps making money if the customer keeps finding value and renewing, so retention and continuous improvement become as important as the initial sale.
This is also why SaaS products update far more frequently than old-style installed software — a vendor whose revenue depends on renewal has a direct financial incentive to keep improving the product, since a stagnant product is a churn risk. For buyers, this generally means better long-term product quality, but it also means dependency on a vendor's continued existence and pricing decisions in a way that owning installed software never required.