Organizations in developed economies use the software-as-a-service (SaaS) model to improve performance and efficiency. However, its adoption in developing economies such as Tanzania is very low due to limited research on its adoption. This study enhances the adoption of SaaS in Tanzanian small and medium enterprises (SMEs) by proposing a conceptual framework based on the diffusion of innovation theory and the technology-organization-environment framework and recommending strategies for improving adoption. The framework was tested using regression analysis on data collected from 139 SMEs. Findings show that eight factors, relative advantage, compatibility, awareness, cost, perceived security and privacy risk, reliability and availability, top management support and trading partners’ pressure, significantly affect adoption of SaaS by SMEs in Tanzania. The study recommends that cloud service providers address security challenges and software compatibility issues and ensure SaaS systems are available, and SMEs’ top management provide support in implementing SaaS solutions to enhance their adoption.