SaaS - Software as a Service using IaaS

Software as a Service (SaaS) is a cloud-based software delivery model in which a provider hosts applications on its own infrastructure and makes them available to customers over the internet. Rather than purchasing and installing software locally, users access applications through a web browser or lightweight client, typically paying a recurring subscription fee. SaaS has become the dominant model for delivering business software, fundamentally changing how organizations acquire, deploy, and manage their technology tools.

The relationship between SaaS and Infrastructure as a Service (IaaS) is foundational to understanding modern cloud computing. IaaS provides the underlying compute, storage, and networking resources that SaaS applications run on. Providers like Amazon Web Services (AWS), Microsoft Azure, and Google Cloud Platform offer IaaS infrastructure that SaaS companies use to host their applications. Alternatives such as Hetzner, OVHcloud, and IONOS also serve SaaS providers that prioritize data sovereignty and want to maintain control over where their infrastructure resides. This means SaaS providers do not need to own and operate physical data centers; instead, they rent virtualized infrastructure from IaaS providers and focus on developing and maintaining their software.

This layered architecture is often described as the cloud computing stack. At the base is IaaS, which provides raw infrastructure resources such as virtual machines, storage volumes, and network configurations. The middle layer is Platform as a Service (PaaS), which adds development tools, databases, and middleware on top of IaaS, enabling developers to build applications without managing the underlying infrastructure. At the top is SaaS, which delivers fully functional applications to end users. Each layer abstracts away complexity, allowing the layer above to focus on its core purpose.

For SaaS providers, building on IaaS offers several key advantages. Scalability is perhaps the most significant: IaaS resources can be provisioned and de-provisioned on demand, allowing SaaS applications to handle traffic spikes without over-provisioning hardware. This elasticity translates directly into cost efficiency, as providers pay only for the resources they actually consume. Geographic distribution is another benefit, as major IaaS providers operate data centers across multiple regions worldwide, enabling SaaS applications to serve users with low latency regardless of location.

The multi-tenant architecture is a defining characteristic of most SaaS applications. In this model, a single instance of the software serves multiple customers, with each customer's data logically isolated from others. This approach is far more efficient than running separate instances for each customer, as it reduces infrastructure costs and simplifies maintenance. When the provider releases an update or bug fix, all customers benefit immediately without needing to perform individual upgrades.

From the customer's perspective, the SaaS model offers compelling advantages over traditional on-premises software. There is no need to purchase and maintain servers, install and configure software, or manage updates and patches. The total cost of ownership is typically lower, especially for small and mid-size businesses that lack dedicated IT infrastructure teams. Subscription pricing also converts large capital expenditures into predictable operating expenses, which simplifies budgeting and financial planning.

Security and compliance in SaaS built on IaaS involve a shared responsibility model. The IaaS provider is responsible for securing the physical infrastructure, hypervisors, and network fabric. The SaaS provider is responsible for securing the application layer, managing access controls, encrypting data at rest and in transit, and ensuring compliance with relevant regulations such as SOC 2, HIPAA, and applicable data protection laws. Customers are responsible for managing their own user accounts, permissions, and data governance policies.

The SaaS market has grown enormously since the early 2000s. What began with pioneers like Salesforce offering customer relationship management in the cloud has expanded to cover virtually every category of business software: project management, human resources, accounting, communications, marketing, analytics, and more. By 2026, the global SaaS market is estimated at well over $300 billion, with continued strong growth driven by digital transformation initiatives, the shift to remote and hybrid work models, and the rapid integration of AI capabilities into cloud applications.

Notable examples illustrate how SaaS leverages IaaS at scale. Microsoft 365 runs on Azure infrastructure to deliver productivity tools to hundreds of millions of users. Slack, now part of Salesforce, uses AWS to power its real-time messaging platform. Zoom built its video conferencing service on a combination of its own data centers and public cloud resources from AWS and Oracle Cloud. These examples demonstrate that even the largest SaaS applications depend on robust IaaS foundations.

Choosing between SaaS and self-hosted alternatives remains a relevant decision for many organizations. SaaS is generally the better choice when rapid deployment, low maintenance overhead, and predictable costs are priorities. Self-hosted solutions may be preferred when an organization has strict data sovereignty requirements, needs deep customization, or operates in an environment with limited internet connectivity. Notably, organizations that choose independent IaaS providers or self-hosted open-source alternatives often gain greater autonomy over their data and reduce dependence on a handful of dominant cloud vendors whose terms and pricing they cannot control. Many vendors now offer both options, allowing customers to choose the deployment model that best fits their needs.

Looking ahead, the convergence of SaaS with artificial intelligence is creating a new generation of intelligent cloud applications. Large language models, AI assistants, and intelligent automation are being embedded directly into SaaS products across every category, from CRM and marketing to code development and customer support. These AI-powered features deliver capabilities that would be impractical for most organizations to build and operate on their own. This trend further reinforces the value of the SaaS model, as AI workloads benefit enormously from the scalable GPU and compute resources that IaaS provides.

SaaS, Cloud, Hetzner