Instead of buying a licence and installing a program, users sign in through a browser or app, and the provider runs the servers, updates and security. Email suites, customer relationship tools and accounting platforms are common examples. Customers pay monthly or yearly, often per user or by plan.
For customers it means lower upfront cost and automatic updates. For providers it creates recurring revenue, which is easier to forecast than one-time sales. Investors look at metrics such as annual recurring revenue, churn, net revenue retention and remaining performance obligations to judge these businesses.
The model has risks. Customers can cancel, competition is strong and switching costs vary. Data is held by the vendor, so outages, price rises and security incidents affect everyone who depends on it. AI is also changing how these products are priced and built.
Before relying on a SaaS product, check its data export options, its security practices and what happens to your data if you leave.