SaaS definition
Software as a Service (SaaS) is a way of delivering software over the internet on a subscription basis, where the provider hosts, maintains and updates the application and customers simply use it through a browser or app. Familiar examples include Google Workspace, Microsoft 365, Salesforce, Slack and Zoom.
How does SaaS work?
A SaaS provider runs one application that serves many customers, called tenants, from shared infrastructure. Tenant data is kept separate by design: a shared database with a tenant ID on every row, a separate schema per tenant, or a dedicated database for each customer that needs stronger isolation. The provider releases updates continuously, so every customer runs the latest version without installing anything.
Commercially, SaaS is sold by subscription: per user, per usage, or in tiered plans with feature limits. Providers track metrics such as monthly recurring revenue, churn, customer acquisition cost and net revenue retention, because the business depends on customers staying and expanding over many months rather than a one-time license sale.
Examples of SaaS
Vertical SaaS serves one industry in depth, such as practice management for clinics, property management for landlords or fleet software for logistics companies. Horizontal SaaS, such as CRM or accounting, serves many industries with the same core product. Vertical products often win through domain-specific workflows and integrations that general tools lack.
- CRM and sales: Salesforce, HubSpot, Zoho CRM.
- Productivity: Microsoft 365, Google Workspace, Notion.
- Communication: Slack, Zoom, Microsoft Teams.
- Finance: QuickBooks Online, Xero, Zoho Books.
- Design: Figma, Canva.
- Software development: GitHub, Jira, Linear.
SaaS vs PaaS vs IaaS
These are the three classic cloud service models. IaaS rents infrastructure, PaaS provides a platform to build and run your own applications, and SaaS delivers a finished application. A SaaS company is usually a customer of the other two: it builds its product on IaaS or PaaS from AWS, Azure or Google Cloud, and sells the result to businesses that never see the infrastructure underneath. Customers rarely care which cloud sits underneath, as long as uptime, security and data location meet their requirements.
Benefits and risks for buyers
For buyers, SaaS means low upfront cost, fast setup, automatic updates, access from anywhere and no servers to run. The risks are less control over data and roadmap, dependence on the vendor's uptime, integration effort between many tools, and SaaS sprawl, where departments subscribe to overlapping tools without IT oversight. Security reviews typically check SOC 2 or ISO 27001 reports, data processing agreements and single sign-on support.
What it takes to build a SaaS product
Building SaaS is more than building an application. The surrounding capabilities decide whether a product can sell to businesses and grow without constant manual work. Nexzem builds SaaS products with these foundations designed in from the first release, so enterprise requirements do not force a rewrite later.
- Multi-tenant architecture with reliable data isolation.
- Authentication, roles and enterprise SSO through SAML or OpenID Connect.
- Subscription billing with tools such as Stripe Billing or Chargebee.
- Self-service onboarding, admin settings and usage analytics.
- Audit logs, backups and security controls that support SOC 2.
- Monitoring, alerting and a clear upgrade path for every tenant.
- Integrations and a public API so customers can connect their other tools.