The Rise of SaaS from Workaround to Standard
Before it became the engine behind modern business, SaaS began as a workaround—a way to make software simpler, cheaper, and shared.
Representational Photo
ANALYSIS, May 12, 2025 — In the 1980s and early 1990s, buying software was a physical experience. You would walk into a store, pick a shrink-wrapped box off the shelf, and install it from floppy disks or CDs. Most businesses ran software locally, on machines they owned, with licenses that were expensive and locked to specific versions. There was no central control, no live updates, and certainly no shared access across devices or locations.
It worked—until it didn’t. As companies grew and operations spread across geographies, the model started to show its age. Updates were a hassle. Teams couldn’t easily collaborate. Small businesses struggled to afford or maintain enterprise-grade tools. And then came the internet.
As broadband became more accessible in the late 1990s, a new question emerged — what if, instead of installing software, users could just access it online?
It wasn’t an overnight shift. But that question led to one of the most important transitions in the history of software—and eventually, business itself.
The Breakthrough That Didn’t Look Like One
To talk about the early history of SaaS, you have to mention Concur, Salesforce, and a lesser-known company called NetLedger (now NetSuite). But the groundwork was laid even earlier by a company called Uptime in 1995, which offered a shared application hosting model—essentially early-stage SaaS.
The term “software as a service” didn’t exist yet. What these companies offered was described as “application service providers” or ASPs. The idea was basic but powerful — rather than sell software licenses, vendors would host the software themselves and let customers access it via the internet, usually through a web browser.
The real shift began with Salesforce, founded in 1999 by Marc Benioff, Parker Harris, and a small team. Salesforce wasn’t the first to deliver software over the internet, but it was the first to package it with a clear business case, a user-friendly experience, and a bold promise — 'No Software'.
That tagline—painted on taxis and billboards—was radical at the time. It mocked the idea of local installs, long deployments, and IT middlemen. Salesforce wanted software to feel like a utility — on when you needed it, always up-to-date, and scalable without friction. The company launched its first product—a hosted CRM—in 2000.
To many in traditional IT, the model seemed flimsy or unserious. But to sales teams and small businesses, it was a breath of fresh air. It worked out of the box. It didn’t require a dedicated server. And it came with predictable, subscription-based pricing.
The Long Climb to Acceptance
Early SaaS companies had to fight against entrenched habits. Large organizations were skeptical about security, uptime, and handing control to external providers. Internet infrastructure was still catching up, and not every company had the bandwidth or mindset to go cloud-first.
But the benefits were too strong to ignore. Startups and small businesses adopted SaaS because they couldn’t afford to wait for IT. Mid-sized firms followed, drawn to its flexibility. Over time, even large enterprises began shifting segments of their operations to SaaS models.
By the mid-2000s, the SaaS ecosystem had grown. Products like Google Apps (now Google Workspace), Dropbox, and Zendesk made cloud software feel normal. APIs allowed tools to talk to each other. Venture capital started pouring in. And suddenly, software wasn’t something you installed. It was something you subscribed to.
The financial model also proved attractive. Instead of hefty up-front costs, companies could budget monthly. Vendors liked the recurring revenue. Investors saw stable cash flows. The SaaS model wasn’t just a tech innovation—it was a business innovation.
What SaaS Looks Like Now
Today, SaaS powers just about every function inside a business — payroll, customer service, HR, supply chain, analytics, communications, and more. Whether it’s Slack for messaging, HubSpot for marketing, or Xero for accounting, the modern office is effectively built on rented software.
But even with its reach, SaaS has stayed true to its original appeal—simplicity. Most users don’t think about where their tools are hosted. They just want them to work, whether they’re logging in from a laptop in Boston or a phone in Bangalore.
Behind the scenes, the SaaS model has matured. Companies now build entire infrastructure stacks using services like AWS, which themselves follow the same utility-based logic. And the market has segmented — horizontal SaaS tools (serving general functions) now compete with vertical SaaS products (designed for niche industries).
Marc Benioff may have popularized the model, but thousands of companies have shaped it—quietly, iteratively, and often outside the spotlight. SaaS is not about one founder or one story. It’s about solving the same old software problems in newer, better ways.
SaaS didn’t begin with a revolution. It began with a problem — software had become too heavy, too rigid, and too expensive. The solution wasn’t flashy. It was practical. And that’s why it worked.
From its early, awkward beginnings to its current dominance, SaaS has followed a simple path—make software easier to use and easier to access. That idea still drives the industry today. No slogans. No dramatics. Just better ways to get things done.
By the mid-2000s, the SaaS ecosystem had grown. Products like Google Apps (now Google Workspace), Dropbox, and Zendesk made cloud software feel normal. APIs allowed tools to talk to each other. Venture capital started pouring in. And suddenly, software wasn’t something you installed. It was something you subscribed to.
