What are the Different Types of SaaS Models?

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  • Written By: D. Nelson
  • Edited By: M. C. Hughes
  • Last Modified Date: 09 September 2019
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Software as a Service (SaaS) is a kind of software offered by certain providers through the Internet or through a particular network. By hosting or providing a particular kind of software, a SaaS provider allows users to access software without having to download or install programs, making it a more efficient and less time consuming process. In SaaS, security updates and model upgrades are normally automatic so that the user is not responsible for performing these tasks. There are two basic kinds of SaaS models: hosted application and software on demand. Billing models also may differ among SaaS providers.

The first of the SaaS models, hosted application, refers to Internet services. In this model, individuals and companies can use the Internet to access software. This software does not have to be run through a particular network and instead may be accessed from any computer that has an Internet connection strong enough to handle the software. Most often, the software hosted by the provider is commercially available, meaning that it could also be purchased for installation or downloaded.

Software on demand SaaS models are run through a network. In these cases, the software is often developed solely for the purpose of SaaS. An example of this kind of software might be competency software that is used by human resource departments that are testing job candidates for evidence of proficiency. This software may only be accessed through that particular network and is not generally commercially available through other means.


In both SaaS models, the benefits of this kind of service are similar. Both models provide users with access to beneficial software without the hassle of having to install it or constantly update and upgrade applications and security services. Small businesses that lack the technology to install complex software often find this service helpful, whereas large businesses and organizations may find that these services are much more cost effective.

There are three potential billing models for SaaS. Subscription fees are very common and require that users pay for access to a software service for a set period of time. Fee based services, on the other hand, normally charge users each time software is accessed. This fee based method of billing is not as common though it may be useful for individuals who are testing different kinds of software or who need to use a program only once or twice.

SaaS models that assist businesses in selling to clients may run on a slightly different billing model. For this kind of software, SaaS providers may collect a certain percentage of the revenue associated with use of the software. The size of commission may depend on factors such as the profitability of the business and the quality or complexity of software being accessed.


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