# What is SaaS – Software as a Service?

What is SaaS – Software as a Service? A model where software is consumed as an online service via monthly/annual payment, with no local installation.

## How it works in practice

SaaS is the model that lets a small store access tools once reserved for corporations. For $100/month you get: a sales platform (Shopify), email (Klaviyo), analytics (GA4), customer service (Gorgias). In 2000, those same tools would have cost millions.

## Related metrics

- Subscription — SaaS = a subscription model
- Recurring Billing — how SaaS charges
- API — SaaS connects via API
- Tech Stack — SaaS tools make up the stack

## Common misconception

'SaaS is always cheaper than on-premise.' Not necessarily long-term. A large store with 50 employees paying $80K/year in SaaS tools might save with an on-premise license. Ask: is a build-vs-buy analysis needed for each core tool?

## How to fix it

SaaS costs too high? (1) Do a SaaS audit — list every tool in a spreadsheet with cost and usage, (2) Find overlapping tools (paying for 2 tools that do the same thing), (3) Negotiate — SaaS vendors discount for annual + prepay, (4) Check whether a free tier would suffice.

## Real-world example

Mid-size store: SaaS stack costing $3,400/month. An audit found 3 overlapping tools and 2 unused tools. Cancellation + consolidation: $2,000/month. Savings: $17,000/year.

## Where to start

Run a SaaS audit once a year. Spreadsheet: Tool, Cost, Owner, Usage Score (1-5), Alternative. Any tool with a usage score below 3 is a cancellation candidate. ROI: one hour of work = $8K+ in average annual savings.

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Category: Technology · From the [Jimmy OS KPI Glossary](https://jimmy-os.com/glossary/kpi.md) · Source page: https://jimmy-os.com/glossary/kpi/saas-software-as-a-service