Software as a Service (SaaS) is an on demand license model, commonly referred to as pay as you go.
SaaS software runs on a remote computer system which is accessed over a network such as the Internet, and the end user or licensee does not have to worry about patching and upgrading the code as the software is considered a service whose details and inner workings are not of interest to the service buyers. This is in contrast to desktop document processing software such as, for example, the MS Office suite where each and every installation needs to be (locally) managed.
From the viewpoint of the user, software that operates on the Saas model runs like cloud computing for which a service fee is paid. More about Software as a Service right below: