SaaS, or Software as a Service, describes software that a company hosts centrally on its own servers and makes available to customers over the internet, typically for a recurring fee rather than a one-time purchase. Instead of installing a program on your own computer and running your own updates, you log into a website or app, and the provider handles hosting, security patches, and new features for every customer at once.

This model matters enormously for how startups are built and valued. Because customers pay repeatedly rather than once, SaaS companies are judged on recurring-revenue metrics rather than one-time sales figures, and a healthy SaaS business depends on keeping customers subscribed — low churn — for longer than it costs to acquire them. It also lowers the barrier for a small company to access enterprise-grade software, since there’s no large upfront license fee or in-house IT team required to run it.

The nuance many beginners miss: not every internet-delivered software is really “SaaS” in the business-model sense — the term implies an ongoing subscription relationship with continuous updates, not just software that happens to run in a browser. A one-time-purchase app hosted online, or a free tool with no recurring payment, doesn’t carry the same recurring-revenue economics that make SaaS attractive to investors.

🇵🇭 Philippine Example

Sprout Solutions, founded in 2015, describes itself as the largest homegrown B2B SaaS company in the Philippines — its HR and payroll platform is sold to thousands of Philippine businesses on a subscription basis and automatically handles local compliance requirements like BIR, SSS, PhilHealth, and Pag-IBIG filings.

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