Understanding SaaS — From CDs to the Cloud

In the last few decades, there’s been a quiet shift in how we use software. It’s called the SaaS shift.

I still remember the Microsoft Office CD. And a lot of other software and game CDs.

When I was a kid, most software came in a box. You'd install it on your computer, enter a license key, and that was it. Use the software without any internet connection needed. Files were stored locally, and you could keep using it for years until it stopped being supported.

That was the perpetual license model. You paid once. You owned it.

But fast-forward to the late 2000s, things began to change. Instead of buying and installing software, we started subscribing to it. The boxes were no longer sold. Instead, the software started living somewhere remote that we couldn't really see.

It's called the Cloud.

Microsoft Office moved to the cloud as Office 365. Now, you don’t need to install anything. You can access your files and tools from anywhere, on any device, as long as you are connected to the internet. The software updates happen automatically in the background.

It’s not just Microsoft. Think Google Workspace, Notion, Canva, Figma, Grammarly, etc. You don’t “own” them. You access them.

This is the core idea behind SaaS — Software as a Service. Instead of installing and owning software, you access it over the internet and pay for it like an ongoing service. It's also sometimes referred to as SaaS delivery model.

SaaS is more than a delivery model. It's a business model.

SaaS is not just where the software was hosted, but it also changed how we paid for it, how we used it. This shift also changed how software companies make money.

In the past, Microsoft sold an office license let's say at $300 and called it a day. In the SaaS world, they charge you $10 a month.

You can use the product as long as you keep paying. Monthly, yearly, whatever is the billing model.

As a customer, this model is more flexible, feels lighter on your wallet as you don't have to spend a huge upfront cost. Cancel anytime you want.

SaaS vs. Perpetual licensing model

For businesses, it’s recurring revenue. Sometimes pricing is consumption-based, not just the subscription cost. Again, think of Google Cloud or Microsoft OneDrive. You have different plans based on usage. If you need more storage or users, you upgrade.

You might think it's a small shift. Maybe. But it's a quiet revolution.

Sometimes when I go back to those days of CDs, I remember the feeling of owning a thing. Owning a box that you held precious.

Today, the software is always one log-in away, always connected. I think it's more convenient and practical.