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The Evolution of SaaS (Software as a Service)

Updatezeit: 2022-05-13 16:15:13

The Evolution of SaaS (Software as a Service)

This article helps readers understand how SaaS has evolved from a service hosting technology and on-demand usage model to the mainstream form of enterprise services it is today by reviewing the evolution of SaaS.

The Evolution of SaaS

It is no longer possible to verify who first proposed the concept of SaaS (Software as a Service). It is widely believed that Marc Benioff, the founder, and CEO of Salesforce, was the earliest practitioner of the SaaS business model.

Mark's original vision of SaaS was very much ahead of its time. While it is a commonplace to use applications on the Internet today, twenty years ago, many people did not use the Internet at all. In addition to being ahead of its time, the SaaS model was also efficient in that users no longer had to repurchase the software and put it on their servers.

Mark firmly believes that there must be a way to make buying software more convenient and cheaper. Enterprises no longer need to invest hundreds of thousands of dollars, millions of dollars and do not need to go through a lengthy installation and implementation cycle; as long as the registration and payment, the user can use the software through their configuration, maintenance, and upgrade of the software does not require the user's hands.

What's more, in the days before mobile applications were born, users could access their applications anytime, anywhere in the world, using any terminal device, just like a website.

This model of selling software as a service, where users only need to pay a fixed monthly fee to use the software, emerged in the 1990s when it was called on-demand service, which is the prototype of SaaS.

Before detailing the SaaS model, it is essential to understand the evolution of SaaS and see how it has evolved from a vision to a mainstream enterprise service model.

It is only in recent years that SaaS has become a mainstream form in the enterprise services space. This evolutionary process is quite long and has gone through four main phases.

Terminal devices: Access the centralized mainframe room through remote terminals to process or obtain information and data for business. Such terminal devices can still be seen in some movies.

C/S application: i.e. client/server access mode. A desktop client accesses a standalone server to process or get information and data for business. This is a common application architecture used by early developers and users in LAN.

Web hosting: Accessing distributed servers through web hosting to process or obtain business information and data, also known as ASP (Application Service Provider). There are already forms such as multi-tenancy, application sharing, subscription fee, etc. There is a little bit of a SaaS prototype.

Cloud-native applications: Access to software-defined, virtualized servers through cloud-native applications, today's SaaS model.

In a nutshell, SaaS started with application hosting and multi-tenancy and gradually developed into a new form of enterprise service with the popularity of the Internet and cloud computing technology.

How to understand SaaS

Because of the different objects and contexts, it is difficult to make a definition of SaaS that is both easy to understand and scientifically rigorous.

For the general public, let's use an analogy to explain SaaS: In the past, every household needed to dig a well to solve the problem of drinking water; later, it was changed to a centralized water supply, i.e., water supplied by the water company, and users only needed to pay the water bill on time, and water would be available when they turned on the tap. This eliminated finding water and drilling wells and saved on engineering costs. The water company's business model becomes "water as a service."

SaaS is a new application architecture model for software technicians that introduces concepts such as shared single instances, multi-tenancy, permission models, storage models, and billing models.

For SaaS service providers, SaaS means a new business model and new business opportunities due to a different delivery model and subscription revenue model than traditional software.

For customers, SaaS is equivalent to outsourcing all IT equipment, software, and operation and maintenance services to SaaS service providers.

The concept of IaaS, PaaS and SaaS

When talking about cloud services, the concepts of IaaS, PaaS, and SaaS often come up, and they form the three main layers of cloud services.

The concept of XaaS

SaaS is a service that sits at the application level. To understand SaaS in-depth, it is necessary to understand the foundation and periphery of SaaS. Other concepts closely related to SaaS are PaaS and IaaS.

In addition to PaaS (Platform as a Service) and IaaS (Infrastructure as a Service), there are many other "as a service" concepts around SaaS. There are many "as a service" concepts around SaaS, such as DaaS (Data as a Service) and OaaS (Operations andMaintenance as a Service).

A careful analysis and classification of these XaaS concepts reveal that most newly created XaaS concepts can be attributed to one of the three core services: SaaS, PaaS, and IaaS. The advantage of dividing XaaS into three core service models is that it can clearly define the respective functional positions.

The concepts of on-demand services and service subscriptions, such as ASP and other models, were introduced long ago. The main reason they did not become mainstream service forms, besides the technical constraints, is that they did not make a clear architecture and layering and division of labor standards as today. After all, a company has to do facilities and platforms simultaneously in addition to applications, so it isn't easy to do well in applications.

SaaS, PaaS, and IaaS

IaaS is equivalent to a virtual server defined by software. SaaS companies generally do not involve IaaS, but whether SaaS companies should do PaaS or not has been debated so far, mainly because there are still different understandings of the definition of PaaS in the industry.

PaaS is a service operated by professional platform service providers, which provides deployment environment and public tools for SaaS, such as organizational structure, permissions, billing, API, etc., i.e., PaaS is a public service.

Therefore, if we strictly follow the definition of PaaS, most SaaS service providers cannot do and do not need to do PaaS, at least in the early stage of SaaS startup. The technical capabilities and resources required to do PaaS are unavailable to SaaS startups. Because the strengths of SaaS service providers lie in business and application, not in platform technology and service capabilities.

The current industry understanding of PaaS is not very accurate. The so-called PaaS is the internal application platform of SaaS companies, which is a part of SaaS. To facilitate the distinction from the concept of hierarchy, it will be called Application PaaS (APaaS).

A few concepts related to SaaS

When talking about SaaS, we often hear concepts such as ToB, enterprise services, software, PaaS, etc. It is easy to confuse these concepts, so explaining here what they mean and how they are related to each other is necessary.


From the perspective of service recipients, services can be divided into two main categories: ToB, which is organization-oriented, and ToC, which is for individual consumers. In addition, there is the so-called ToG (for government agencies), which we generally count as organization-oriented, that is, as ToB.

The scope of ToB is enormous, and SaaS is only one category of ToB. They are inclusive of each other, but sometimes the two terms are mixed.

Enterprise Services

Enterprise services is a collective term for organization-oriented services. There are many types and forms of enterprise services, providing businesses such as IT service outsourcing, human resources, legal services, consulting services, financial and tax services, corporate training, and even logistics services and corporate cleaning, also belong to enterprise services.

SaaS is just one of the many ways of enterprise services. The enterprise services mentioned in the SaaS field mainly refer to the services provided to enterprises in a SaaS way, such as SaaS CRM, SaaS taxation, etc.

Although SaaS and enterprise services are often confused, there is a difference between them: SaaS represents a way of service delivery, while enterprise services represent the specific content of the service. In other words, SaaS service providers see SaaS, while enterprise customers know the service. SaaS changes the way of service, not the content of the service.


Although both software business and SaaS include software, they are two completely different businesses with different business models. In other words, software and SaaS are two separate businesses. One sells products, and the other sells services.

From the industry market, software and SaaS are competition and substitution relationships, and the software itself has the transformation trend to SaaS.


According to the PaaS business model definition, most PaaS developed by SaaS companies themselves is not PaaS. These PaaS are SaaS. Conversely, all SaaS must have the business definable and scalable capability of PaaS to compensate for the lack of SaaS personalization capability.


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