The demand for cloud-based applications is all-time high. Businesses across all sectors are moving towards the SaaS model for improved operational efficiency and better results.
Look at these statistics.
The estimated market worth of the SaaS market is projected to rise from $273.55 billion in 2023 to $317.55 billion in 2024, according to Fortune Business Insights. Improved productivity and enhanced security are two core reasons why SaaS buyers choose cloud software.
As an entrepreneur, you must have a thorough understanding of SaaS architecture to make decisions that result in long-term sustainability. This architecture is the base of all SaaS applications. It allows users from different departments, locations, and roles to share the same application and perform different functions seamlessly.
As a result, users can access SaaS apps anytime, anywhere, and get things done more efficiently.
Let’s explore the SaaS architecture in detail, analyze its types, and discuss various tenancy models for organizations and individual users.
What is SaaS Architecture?
The term SaaS architecture is considered the blueprint of SaaS applications. It is a mode of delivering specific features or functionalities via cloud-based solutions to meet users’ needs.
There are two key components of SaaS architecture. The first is a vendor, also called a SaaS provider, which hosts the cloud application on a remote server. That SaaS system caters to the needs of users from specific interests, niche, or industry. The second component is the user, which pays a recurring subsection fee to access those SaaS capabilities over the internet.
In simple words, SaaS architecture defines the process in which certain functionalities are delivered from the SaaS provider to customers. The vendor takes care of the technical aspects of the SaaS application, while the user gives a monthly or yearly fee depending on the chosen pricing plan.
To better understand the SaaS architecture in cloud computing, let’s start by exploring their types first:
Types of SaaS Architecture
There are two broad categories of SaaS architecture: Horizontal SaaS and vertical SaaS.
1. Horizontal SaaS
Horizontal SaaS architecture focuses on the software’s functionality. It caters to the needs of users with specific roles and requirements.
For instance, workforce management SaaS applications have features to streamline HR operations. Similarly, HubSpot is mainly used by sales and marketing teams. These SaaS applications are designed to meet specific business requirements only.
Hence, horizontal SaaS apps offer limited functionalities only. They are more specialized in their respective areas and do not offer multifunctional capabilities.
Below are some of the popular horizontal SaaS applications and their functions:
Horizontal SaaS | Function |
Salesforce | Customer Relationship Management (CRM) |
Smart Workforce | Workforce management |
Zoom | Video Conferencing and Online Meetings |
Asana | Project management |
Dropbox | File Storage and Collaboration |
2. Vertical SaaS
Vertical SaaS, on the other hand, is industry-specific. These applications meet the business needs of organizations from specific sectors like finance, engineering, IT, real estate, agriculture, etc.
With this broad approach, vertical SaaS architecture covers everything an industry needs to stay competitive. Let’s understand this concept with an example.
Suppose you run an IT company and need a SaaS to effectively manage your team. Your employees follow remote, hybrid, and on-site models. There must be a system that helps you track progress on ongoing projects and gives you real-time updates for better results.
Hence, you buy a cloud-based IT helpdesk management system. It offers unique features like ticketing, asset management, time tracking, and performance analytics.
This vertical SaaS application for IT companies can solve a lot of issues you are facing related to team management, collaboration, and performance evaluation.
See the below table for popular vertical SaaS systems and industries they are designed for:
Vertical SaaS System | Target Industry |
RealPage | Real estate |
Guidewire | Insurance |
Veeva Systems | Pharmaceutical and Life Sciences |
LiveCosts | Construction |
Shopify | Retail and e-commerce |
Tenancy Models of SaaS Architecture
Based on shareability, there are four different tenancy models of SaaS architecture:
1. Single-tenant Architecture
Single-tenant is the most popular SaaS architecture. It serves one user at a time. If you have purchased a subscription to a single-tenant SaaS application, you get exclusive access to the database, infrastructure, and architecture.
Oracle Cloud, for example, is a SaaS application based on single-tenant architecture. It allows users to access their desired functionalities within a private cloud SaaS environment.
2. Multi-tenant Architecture
Multi-tenant architecture, as the name suggests, serves multiple users simultaneously. It is designed for organizations where several employees use the same SaaS application for different roles. They share the common database and store their confidential files and data securely.
Google Workspace and Microsoft 365 are two popular examples of applications with multi-tenant SaaS architecture. Their users access all productivity apps to collaborate, manage documents, and perform different tasks via the Internet. There is no need to install these apps on the device.
Moreover, users can also live edit or create the same documents in Word, Excel, PowerPoint, etc.
3. Hybrid-tenant Architecture
This model combines the elements of both single-tenant and multi-tenant architectures. Users share the core features and components while keeping certain services isolated. Just like access control where some options are open for all and a few functionalities are exclusive to particular individuals only.
Hence, hybrid-tenant architecture balances efficiency and customization. Companies can tailor this architecture according to their needs. Nevertheless, it is more complicated in design and management and has a steep learning curve.
An example of a hybrid-tenant SaaS application is Microsoft Azure. It offers shared components like compute resources, core application logic, and virtual machines. Conversely, database instances and configuration settings are isolated for each user separately.
Final Thoughts
SaaS applications have become a necessity for business growth today. They allow users to access their desired functionalities over the internet without on-device installation. Besides, users can customize the app’s features to their growing needs.
SaaS architecture defines the mode of software delivery. It has two main types: Horizontal and vertical. The former focuses on functionality while the latter one is industry-specific.
Choosing the right SaaS architecture type is essential to better utilize cloud-based applications for business growth. Entrepreneurs must deeply analyze their team’s requirements and business needs before making the final decision that translates into long-term growth and stability.
