How SaaS Works

Knowing how SaaS works can streamline your business. Businesses are increasingly using SaaS, or software as a service, instead of buying software and installing it. With SaaS, a third party hosts the software online and you can access it through the Internet. For this reason, SaaS is sometimes called web-based software.

Examples of SaaS include software for accounting, customer relationship management (CRM), inventory, employee time card tracking, estimating, invoicing, and collecting payments.

You simply access the software from any device and do your computing through your Internet connection. That means you can use a laptop, tablet or smartphone to run your business.

A Detailed Look at How SaaS Works


You don’t buy any software. Instead you subscribe to the service. Many SaaS offerings use a monthly billing method, though some will ask you to pay for an entire year up front. You are paying for access to the software.

There may be levels of subscriptions. For example, a basic access package may cost less but have limited features, or a comprehensive package may give you full access that will cost more. Many SaaS solutions will allow a free trial period so you can get a feel for the application.

Openview explains how SaaS companies typically approach pricing.


Often, businesses start with a more limited version of the software and add features as the business grows. This scalability is one of the great advantages of Saas. You choose the level of service you need at each stage of your business growth.

Also, this scalability works in both directions. That is why many companies like how SaaS works. If you find you are paying for more features than you really need, you can scale back to the level that suits your business.

Convenient Access

If you are always on the go, you will find SaaS accessibility to be a big advantage over conventional software. Because your applications are on the Internet, you can use them with any device that has online access.

Ease of access means your employees can also use the software from any location. This ensures that everyone has the same information at the same time, so you can coordinate tasks.

Note that there is also no time limit for accessing SaaS software. Because of how SaaS software works, you can use it during off hours, such as weekends, nights and early mornings. This can be handy when dealing with a client in a different time zone or while trying to meet an important deadline.

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Virtually all SaaS solutions provide regular updates. This can include such things as new applications the solution will integrate with, or new features that the designers develop.

How Saas works with updates is that they are “pushed” out to you as they are ready. You don’t have to turn them on or ask for them. This keeps your software current with no need to reinstall as you would with conventional software. Everyone who uses the application at your company receives the update at the same time, eliminating the need to update software manually on multiple devices.

Typically, you do not have to pay for updates. In fact, some SaaS vendors update their software monthly, adding new features or improving security.


You can customize many functions of an SaaS application. For example, invoicing software allows you to add your branding.

You may also customize the look of the user interface in many instances. In addition, you can require permissions for certain sections of an application, such as when you don’t want all employees seeing sensitive payroll information. In some cases, you can choose which fields need to be auto-populated with data. SaaS applications may also allow you to create folders for clients, or create a project that contains all related tasks. You may also be able to create calendar reminders for your milestones on a project.

Your customizations remain in place even when the software is updated. You never wake up to an application that has been emptied of data due to an overnight change.

Data Ownership

Many business owners worry about putting their data online, because they want to make sure they own it, as opposed to the company that makes the application owning the data. This is a legitimate concern that should be addressed before you sign anything.

It is important to read the contract and make sure there is a service-level agreement that plainly states that you own your data. Also request a clause that says the company will release your data immediately if it goes out of business.

Check to see if you can regularly export your data from the application so you can back it up on your own server. This can be a good proactive step in case you want to access data without going onto the Internet.

Data Safety

Business owners often worry about the safety of putting their data on the Internet. SaaS companies have the means to pay for much better security than an individual business can. SaaS vendors typically test their security regularly and maintain strict standards.

Check to see if you will be involved in multiple tenancy. How SaaS works with many businesses is by putting several of them in a single database. That could mean if one of the companies’ data is hacked, the other businesses in the database could be vulnerable. If this is a concern for you, ask that your data not be placed in a database with other customers.


The Bottom Line

SaaS is here to stay. It is now so common, it’s fair to say that businesses that want to remain competitive need to consider SaaS. Most administrative tasks are automated, leaving business owners free to focus on growing their companies. Also, items such as invoices, contracts and proposals can be generated quickly, with a client’s contact information auto-filled. The best advantage of SaaS solutions is that if you don’t like one, there is sure to be a competitive app that is out there. Be sure and shop around for the applications that fit your business best. has a handy list of frequently asked questions about SaaS.

Intacct offers a detailed look at how the SaaS business model works.


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