What is SaaS?

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SaaS, or Software as a Service, is a cloud-based software delivery model where users access applications over the internet instead of installing them locally. It allows businesses and consumers to use software on a subscription basis, often with automatic updates and centralized data management.

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Why SaaS matters?
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SaaS has transformed how companies deploy and scale software. It reduces upfront costs, simplifies IT management, and enables faster innovation. For ecommerce and marketing teams, SaaS tools power essential functions like analytics, CRM, email automation, and fulfillment — all without heavy infrastructure investment.

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How SaaS works?
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In a SaaS model, the software provider hosts and maintains the application on remote servers. Users pay a recurring fee (monthly or annually) to access it through a web browser or API. The provider handles updates, uptime, and security, while customers focus on usage and outcomes. Common SaaS pricing structures include tiered, per-user, or usage-based models.

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Example in ecommerce
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A DTC brand uses SaaS platforms like Shopify for store management, Klaviyo for email marketing, and Gorgias for customer support. These tools integrate seamlessly through APIs, allowing the brand to run all operations in the cloud without maintaining physical servers or manual updates.

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Common mix-ups
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SaaS is sometimes confused with PaaS (Platform as a Service) or IaaS (Infrastructure as a Service). PaaS provides tools for developers to build applications, while IaaS offers raw computing resources. SaaS, by contrast, delivers complete ready-to-use software to end users.

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Best practices

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• Evaluate SaaS vendors for reliability, integrations, and data security before adoption.
  
  
• Track usage metrics to ensure teams are getting full value from subscriptions.
  
  
• Standardize SaaS procurement to prevent tool sprawl and overlapping functions.
  
  
• Use single sign-on (SSO) and access controls to manage user permissions safely.
  
  
• Periodically audit SaaS spending to align costs with business impact.
  
  

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Industry benchmarks

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• Average SaaS companies grow 20–30% annually, with top performers exceeding 50% growth.
  
  
• Healthy SaaS gross margins typically range from 70–85% due to scalable infrastructure.
  
  
• The average mid-size business uses 80–120 SaaS applications across departments.
  
  

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Related terms

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Subscription Model

Cloud Computing