What Are the Features and Future Potential of SaaS? Differences from IaaS and PaaS Explained

SaaS (Software as a Service) is the most widely used option for companies choosing cloud services.
Why is that?

It's because all you need is an internet connection and a browser to access it easily, with no hassle. With the SaaS model, the vendor manages all technical issues, so customers don't need to rely on in-house IT specialists.

This article introduces the definition, features, benefits, and leading services of SaaS.

1. What Is SaaS (Software as a Service)?

SaaS is a software deployment model in which a third-party provider builds applications on cloud infrastructure and makes them available to customers over the internet.

Because of this, rather than simply installing the software on a local machine like traditional software, you can access it from any device as long as you have an internet connection and a web browser.

Customers can deploy SaaS under one of three different models defined by the U.S. National Institute of Standards and Technology (NIST).

1.1. Private Cloud

Cloud software is built on infrastructure provisioned for exclusive use by a single organization made up of multiple consumers. This infrastructure may be owned, managed, and operated by the organization, a third party, or a combination of both, and it may exist on-premises or off-premises.

1.2. Public Cloud

Cloud software is built on infrastructure made available to the general public. This infrastructure is owned, managed, and operated by a venture company, an academic institution, a government agency, or a combination of these, and it exists on the cloud provider's premises.

1.3. Hybrid Cloud

Cloud software is mainly built on one type of infrastructure but can switch to another when demand is high. Standardized or proprietary technology enables the portability of data and applications.

2. Benefits and Features of SaaS Services

For software developers, SaaS is the holy grail of recurring revenue models, offering faster deployment times than on-premises software. Like other cloud services, SaaS gives small and medium-sized businesses the opportunity to disrupt existing markets while taking advantage of fair SaaS pricing models.

2.1. Benefits of SaaS Services

・Accessibility. Can be run from any device via an internet browser, 24 hours a day, 365 days a year
・Operational management. No need for installation, equipment updates, or traditional license management
・Cost-effectiveness. No upfront hardware costs, with flexible payment options such as pay-as-you-go pricing
・Scalability. Solutions can easily scale to match changing needs
・Data storage. Data is routinely stored in the cloud
・Analytics. Access to data reporting and intelligence tools
・Improved security. SaaS providers invest heavily in security technology and expertise

2.2. SaaS Solutions Are Useful in a Variety of Business Scenarios

Startups and small-to-medium businesses often find SaaS convenient when they lack the time, funding, or expertise to build applications in-house or host them on-premises.

・Large enterprises can use SaaS technology for short-term projects or applications that aren't needed year-round.
・When dealing with applications that require both web and mobile access, any company can benefit from SaaS technology.
・Implementing SaaS is fairly simple and allows for self-provisioning for simple applications accessible via the public cloud. However, SaaS solutions designed for a private cloud require hands-on setup and training from the vendor.

3. Challenges of SaaS Services

Naturally, the biggest advantage of using SaaS is also its biggest challenge. With a strong, reliable connection, it's a strength. Of course, without a reliable connection, it becomes a drawback.

As broadband and high-speed networks like 5G become more widespread, this issue is becoming less of a concern. Still, there are several other scenarios worth considering before deciding to adopt a SaaS solution.

Other potential challenges include the following.

・Loss of control. Since the vendor manages everything, you become dependent on the vendor's capabilities.
・Limited customization. Most SaaS applications offer very little room for vendor customization.
・Reduced speed: SaaS solutions can have higher latency than client/server applications.
・Security risk. SaaS providers secure the application itself, but strict measures are still needed for sensitive data.

4. Top 6 SaaS Companies and Service Examples

4.1. Office 365

Office 365 integrates applications and services such as Word, Excel, and PowerPoint, and is updated monthly with the latest features and security updates.

4.2. Google G Suite

Google G Suite is Google's answer to the productivity challenges faced by most companies and organizations. It brings together a range of solutions — email, word processing, spreadsheets, presentation decks, shared calendars, and cloud storage — into a single tool.

4.3. Dropbox

Dropbox provides clients that run on Windows, Mac, and Linux, as well as mobile devices, letting users drag and drop files from their desktop into a browser to upload them to Dropbox.

4.3. Salesforce

Salesforce is a CRM solution that connects companies with their customers. A single integrated CRM platform allows every department to share one unified view of each customer.

4.5. SAP Concur

SAP Concur integrates a company's travel booking and expense tracking, giving customers a better user experience, more accurate data, and rich reporting. Its intuitive web-based and mobile tools let users complete expense reports quickly and accurately.

4.6. Zoom

Zoom brings together cloud video conferencing, simple online meetings, and group messaging into a single, easy-to-use platform.

5. Differences Between SaaS, IaaS, and PaaS

As you probably know, SaaS (Software as a Service) makes applications available over the internet. To use SaaS, customers don't need to install or run any program on their own device.

PaaS (Platform as a Service) provides a framework for creating and deploying applications while eliminating the need to manage infrastructure. IaaS (Infrastructure as a Service) offers pay-as-you-go infrastructure for businesses with the benefits of flexibility and control.

The difference between these three cloud computing services comes down to the layer of control. IaaS is the easiest to control, since customers are responsible for managing the application, data, runtime, middleware, and operating system themselves. PaaS customers, on the other hand, only manage the application and data, while SaaS customers are only responsible for the data within the software.

Differences between SaaS, PaaS, and IaaS (source: ntt-east)

6. SaaS Market Size and Future Outlook

6.1. Trends in SaaS Market Size

According to ITR market research, Japan's domestic SaaS market was estimated at approximately ¥69 billion* in 2022. The packaged-software market size is approximately ¥79 billion, so SaaS is growing fast enough to close a gap of roughly ¥10 billion. In terms of year-over-year growth, the market has continued to grow by 120%–130%* every year since 2018.

This graph shows that the SaaS market is likely to keep expanding going forward. The SaaS market, valued at around ¥600 billion in 2019, is projected to overtake packaged software in 2021. By 2024, the market is expected to reach approximately ¥1.12 trillion — nearly double in size over five years.

SaaS, IaaS, and on-premises market (2022)

6.2. The Future of SaaS

Going forward, companies are expected to design and develop new technologies to meet demand, further accelerating cloud computing adoption. Some companies are predicting a resurgence of SaaS technology focused heavily on mobile devices. Others are watching the trend of artificial intelligence (AI) taking over the SaaS market in fields such as logistics, transportation, and retail.

As technology keeps evolving, so will the SaaS model. Still, off-the-shelf products and ready-made tools will always have a place in business. Overall, SaaS offers a wide range of benefits for both suppliers and users alike. Companies will continue to need capable IT professionals who can analyze, evaluate, and design cloud computing solutions that fit both current and future needs.

7. Frequently Asked Questions (FAQ) About SaaS

What is SaaS?

SaaS refers to software, or a way of delivering it, that lets users access only the functionality they need, exactly when they need it, as a service. It generally refers to a mechanism that provides the necessary functionality over the internet using a single-system, multi-tenant architecture.

What's the difference between SaaS, PaaS, and IaaS?

SaaS handles operational management all the way up to the applications used by end users; PaaS manages the middleware and server OS needed to provide a development environment; and IaaS mainly focuses on maintaining and managing hardware.

Why is "MRR" so important for SaaS?

Measuring MRR shows what portion of total revenue is recurring, and tracking it over time makes it possible to gauge a company's mid-to-long-term growth and stability. That's why MRR is seen as a key metric for tracking growth in subscription-based businesses.

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8. Develop SaaS Together With Miichisoft

Miichisoft was founded in Vietnam in 2018 and also established a base in Tokyo in 2019. Even before that, we had more than 10 years of experience in the IT industry building web applications, mobile apps, and business systems.
Alongside the evolution of SaaS, we've partnered with Japanese companies to develop SaaS services and systems mainly for industries such as real estate, e-commerce, logistics, e-learning, and construction.

By combining our IT consulting team based in Japan with our highly skilled development team in Vietnam, we provide one-stop support from the PoC stage through early- and later-phase development to operations.
If you're considering a SaaS service, please feel free to reach out to us.
Thank you very much.