he technology market is evolving at a rapid pace, and businesses are increasingly adopting modern, flexible solutions that optimise costs and improve efficiency. One such solution is SaaS (Software as a Service), a model for delivering cloud-based software. Over recent years, more companies have shifted away from traditional on-premise platforms in favour of cloud solutions. What is driving the rise in SaaS popularity, and does it have the potential to replace traditional technological solutions? This article explores these questions.
The Rise of SaaS
According to a Gartner report, SaaS accounted for approximately 60% of total spending on cloud services in 2023, and this share is expected to exceed 70% by 2025. Similarly, a study conducted by McKinsey revealed that 80% of mid-sized companies in the USA and Europe already use at least one SaaS solution, and 45% plan to increase their investment in SaaS over the next two years. Furthermore, in 2015, traditional on-premise software was the standard for 76% of organisations, but by 2023, this figure had fallen to 42%.
These data suggest that with the ongoing development of cloud technologies and the growing demand for scalable, cost-effective solutions, SaaS will play an increasingly significant role in the digital transformation of businesses.
What Is SaaS?
SaaS, or Software as a Service, is a model of delivering software where applications are hosted by a provider on external servers and accessed by users over the internet. Unlike traditional on-premise software, SaaS does not require users to purchase licences or maintain their own IT infrastructure. A notable example of a SaaS-based e-commerce platform is Shopify.
Key Advantages of SaaS
Cost Flexibility
SaaS solutions eliminate the need for investments in IT infrastructure, server purchases, or complex configurations. Users pay a regular subscription fee that covers all essential costs, such as hosting, updates, and technical support. This makes SaaS an appealing option for businesses with limited budgets. Moreover, it is equally advantageous for large organisations that can access advanced features and scale their operations by investing in higher-tier subscription plans.
Quick Implementation
SaaS solutions can be implemented almost immediately after registration. Companies can configure their store, customise it to their needs, and start operations within hours. For smaller businesses, this allows a quick market entry, while for larger organisations, it facilitates the efficient deployment of new features or the launch of sales in additional markets.
However, implementing SaaS in large enterprises often requires adapting the platform to existing systems (e.g., ERP, CRM, WMS), which may involve additional integrations and configurations. For more complex technical and operational needs, collaboration with a technology partner, such as an e-commerce agency, may be necessary.
Ease of Use
SaaS platforms feature intuitive interfaces and functionalities that do not require specialised technical knowledge from users at the start. Drag-and-drop tools enable easy store customisation, product management, and order tracking. However, for large companies operating in diverse markets with complex structures or customised processes, initial use of a SaaS platform may require technical support. Once configured, the system becomes intuitive and straightforward for everyday management.
Scalability
SaaS platforms allow businesses to adapt their services as they grow. Users can increase capacity, expand the product range, or unlock additional features by upgrading their subscription plans without investing in new infrastructure. However, it is essential to remember that service expansion, especially for large organisations, can result in higher subscription costs. Careful budget planning is needed to ensure investments align with business growth and needs.
Regular Updates
SaaS providers handle ongoing updates, new feature deployments, and security enhancements. This ensures that store owners always use the latest software versions without managing updates themselves.
Integrations and Omnichannel Sales
SaaS platforms support omnichannel sales by enabling seamless integration with popular marketing, analytical, and sales tools such as Google Analytics, Facebook Ads, and payment gateways (e.g., PayPal). Additionally, integration with marketplaces (e.g., Amazon, eBay) and social media channels (e.g., Instagram, Facebook) allows businesses to sell products across multiple platforms simultaneously. This simplifies offer management and provides better performance monitoring across channels, which is crucial for both small enterprises and global organisations.
SaaS vs. Other Technologies
There are various models for delivering software and infrastructure, each with unique features and use cases. Among the most popular are Open Source, On-Premise, and PaaS, which differ in terms of control, flexibility, costs, and user responsibilities. Understanding these differences is critical for making informed choices and aligning technology with business goals.
Open Source
Open Source software is provided with open-source code, allowing users to modify and tailor it to their needs. While often free, Open Source solutions require technical expertise and resources for system management and maintenance. Unlike SaaS, the responsibility for updates, security, and support falls on the store owner, making this model more demanding technologically.
On-Premise
On-Premise solutions involve installing software directly on a company’s local infrastructure, giving organisations full control over data and systems. This model is often chosen by industries with stringent security requirements, such as finance or the public sector. Compared to SaaS and Open Source, On-Premise entails higher initial costs due to hardware, licences, and infrastructure maintenance. It is suited for businesses that prefer to avoid cloud storage and maintain independence from external providers.
PaaS (Platform as a Service)
PaaS provides an environment for developing, testing, and deploying applications without the need to manage infrastructure. It is primarily targeted at developers, enabling them to focus on software creation using the tools and resources supplied by the provider. Unlike SaaS, PaaS does not offer ready-made software but rather the infrastructure to build it.
Who Is SaaS Best Suited For?
SaaS e-commerce platforms cater to businesses of all sizes – from small enterprises to global corporations. Thanks to its flexibility, ease of implementation, and scalability, SaaS is a choice for both new companies entering the market and large organisations requiring advanced features and a global reach.
Small and Medium-Sized Enterprises
For smaller businesses, SaaS platforms are an excellent solution due to their low initial costs and the lack of a need for an in-house IT team. Tools like Shopify offer ready-made templates, intuitive interfaces, and integrations with popular marketing tools, allowing owners to quickly launch their online sales. This enables small and medium-sized enterprises to focus on business growth instead of worrying about the technical aspects of running an online store.
Businesses Looking to Launch Sales
For companies aiming to quickly enter the market, SaaS is an ideal choice. Pre-built features such as payment gateways, inventory management, and analytics tools make it possible to start selling in a short time frame. This is particularly advantageous for startups and new market entrants who want to concentrate on scaling their business rather than building infrastructure from scratch.
Large Organisations with Complex Processes
SaaS aligns well with the needs of large organisations with advanced processes and specific business requirements. It is designed for companies that require sophisticated features, a high level of personalisation, and integration with other systems, such as ERP or CRM. For such organisations, SaaS not only simplifies e-commerce management but also enables the scaling of operations across global markets. Flexible subscription plans allow large enterprises to tailor the platform's scope to their needs.
Businesses Requiring Scalability
SaaS provides the ability to easily adjust services as a business grows. Companies can start with basic features and gradually expand their capabilities by adding new tools and functionalities. For large organisations, scalability means the ability to quickly respond to increasing demand, new markets, or changing market conditions – all without the need for significant infrastructure investment.
Companies with Limited Technological Resources
SaaS eliminates the need for a large in-house IT department, making it an attractive solution for companies that prefer to focus their resources on core business goals. SaaS providers offer technical support, regular updates, and built-in security measures, allowing businesses to avoid issues related to the technical side of running an e-commerce platform. However, for larger organisations with complex business processes, it is often beneficial to work with an external technology partner that has the expertise and resources to implement advanced e-commerce solutions effectively.
Will 2025 Be the Year of SaaS?
There is no definitive answer to this question. SaaS platforms are likely to gain even more significance in the coming years, playing a crucial role in businesses' digital transformation. Their flexibility, cost efficiency, and ease of use make them suitable solutions for organisations of varying sizes and industries.
However, the choice of platform should always be based on a company’s specific needs and operational requirements. While SaaS is an excellent solution for many businesses, it is not universal. For some, Open Source or On-Premise platforms may be better suited depending on the desired level of control, security, budget, and technical demands.
At Strix, we tailor technology to a company’s unique needs and business goals. If you are unsure which e-commerce platform is right for your business, we are here to help you make an informed decision. Contact us to learn more.