What is a SaaS Application?
SaaS (Software as a Service) is software you access via a web browser or app, hosted by the vendor. You pay a recurring subscription and the vendor handles updates, security, and infrastructure. Examples include Salesforce, Slack, and Microsoft 365. The alternative is on-premise software, which you install and manage yourself.
SaaS stands for Software as a Service: software you use via the internet, hosted and maintained by the vendor. You pay a subscription instead of buying and installing software.
What SaaS Means
SaaS stands for Software as a Service. It is a delivery model where you access software over the internet rather than installing it on your own device or server. The vendor hosts the software and its underlying infrastructure, handles updates and maintenance, and you pay a recurring subscription to use it. The term is often used interchangeably with “cloud software” or “web application”, though those have slightly broader meanings.
Advantages of SaaS
The main practical advantages are low startup cost and instant availability. You sign up, pay, and start using the product the same day: no server procurement, no installation project, no IT maintenance contract. Updates happen automatically without you doing anything. Because the software runs in the vendor’s infrastructure, you can access it from any device with a browser. For teams that grow or shrink, SaaS licences scale easily by adding or removing seats.
Disadvantages of SaaS
The ongoing subscription cost is the most visible downside. Over several years, the cumulative cost can exceed what a one-time licence would have cost. You are also dependent on the vendor: if they raise prices, change features, or shut down the service, you need to migrate. Data is stored in the vendor’s systems, which raises questions about privacy, compliance, and what happens when you cancel. Customisation is usually limited to what the vendor’s interface exposes.
Well-Known SaaS Examples
Salesforce is the classic example: a CRM that replaced on-premise customer management software. Slack, Microsoft 365, HubSpot, Dropbox, Zoom, Shopify, and Xero are all widely used SaaS products. In the automation and AI space, tools like n8n Cloud and Claude (via claude.ai) are also SaaS when used in their hosted form. For n8n specifically, the self-hosted version is an alternative to the SaaS model. Read What is n8n to understand how that trade-off works in practice.
SaaS vs On-Premise vs Custom-Built
On-premise software runs on your own infrastructure and gives you full control, but requires technical staff to maintain it. SaaS trades control for convenience and speed. Custom-built software is developed specifically for your organisation’s workflows, gives you the most flexibility, and avoids vendor lock-in, but carries a higher upfront investment. Many organisations use a mix: SaaS for standard functions (email, accounting, project management) and custom software for processes that are unique to their business. See What is Claude by Anthropic for an example of AI delivered as SaaS.
Our tip: Before signing a SaaS contract, check three things: the data export options (can you get your data out in a usable format?), the price lock or renewal terms (how much can prices increase?), and the compliance certifications (relevant if you handle personal data under GDPR).
Frequently asked questions
What are examples of SaaS applications?
Well-known SaaS applications include Salesforce (CRM), Slack (team communication), Microsoft 365 (productivity), HubSpot (marketing and sales), Dropbox (file storage), Zoom (video calls), Shopify (e-commerce), and Xero (accounting). These are all software products you access online without installing anything locally, and you pay a subscription fee to keep using them.
What is the difference between SaaS and on-premise software?
On-premise software is installed on your own servers or computers. You buy a licence, install the software, and are responsible for updates, backups, and security. SaaS is hosted by the vendor: you access it online and they handle all infrastructure. On-premise gives you more control and can be cheaper at very large scale. SaaS is faster to set up, always up to date, and accessible from any device.
What are the disadvantages of SaaS?
The main disadvantages are vendor dependency and ongoing cost. You are reliant on the vendor staying in business, maintaining the service, and not making breaking changes. If they raise prices or discontinue the product, migrating can be complex. Monthly costs also add up over time; at high usage, SaaS can become more expensive than a one-time on-premise licence. Data sovereignty is another concern: your data is stored in the vendor's infrastructure, often in another country.
Is SaaS secure?
Reputable SaaS vendors invest heavily in security, often more than individual companies would for on-premise setups. They have dedicated security teams, regular audits, and compliance certifications like ISO 27001 or SOC 2. However, security incidents do happen, and you depend on the vendor's practices. Key questions when evaluating a SaaS product: where is data stored, who has access to it, and what happens to your data if you cancel.