SaaS has become the dominant model for delivering business software, yet many founders use SaaS products daily without a clear understanding of what the term means or how the model differs from the way software was traditionally sold. Understanding what SaaS is helps founders assess the financial and operational implications of building their business on subscription-based tools.
SaaS — Software as a Service — is a software delivery model in which applications are hosted in the cloud and accessed over the internet through a browser or application, rather than installed on local computers. The software vendor manages the infrastructure, maintenance, updates, and security, and customers pay for access on a subscription basis — typically monthly or annually. The SaaS model has significantly reduced the upfront cost and complexity of adopting business software compared to traditional on-premise installations.
The subscription model of SaaS means software costs become ongoing operational expenses rather than one-time purchases. Over time, total SaaS spend can be a significant line item in the operational budget — periodic audits to assess whether each subscription is being used and delivering value are a worthwhile discipline. Our guide to SaaS for UK founders covers the model and how to manage a growing portfolio of tools effectively.