What is Software-as-a-Service (SaaS)?

Software as a service, more commonly referred to as SaaS, is a software distribution model in which applications are hosted by a vendor or service provider and made available to customers over a network, typically the Internet.

How is SaaS different from the previous ASP?

While SaaS is similar in purpose to the ASP (application service provider) the implementation is quite different. The ASP generation was merely traditional client-server applications delivered typically over a Citrix® MetaFrame. In some cases an HTML front end was added as an afterthought. Because the applications were not written as net-native applications, performance was poor and application updates were no better than self managed applications. By comparison, in the SaaS model, the service provider gives customers network-based access to a single copy of an application created specifically for SaaS distribution.

saas Industry Buzz

“Leading CIOs are making SaaS an important part of their IT portfolio. IT skills constraints are not diminishing. Inserting SaaS into that mix gives CIOs a lot more budget and staffing flexibility than they had before.” Aberdeen Research

“We're beyond the tipping point. The next era of business computing is being driven by on-demand software.” Ann Winblad, Co-founding Partner, Hummer Winblad Venture Partners

saas market

The Software as a Service sector is among the fastest growing segments in the software industry. IDC suggests that SaaS growing at over 20% and is projected to make up 30 percent of the software market by 2007 reaching over $10B by 2009. Additionally, Triple Tree suggests the market is being underestimated by a whopping 80%.

IDC believes that telecommunications companies (e.g., AT&T, Softbank Telecom, Telecom Italia) and professional service providers will play a role in the on-demand ecosystem and act as a viable sales channel.

Companies are becoming increasingly frustrated with the long deployment cycles, high costs, complicated upgrade processes and information technology (IT) infrastructure demanded by traditional software applications. Many are realizing that the future of IT is moving away from data center, system and infrastructure management and more toward business process improvement. Software as a Service (SaaS) has become one of the fastest growing segments of the IT sector because it provides organizations with ‘turn-key’ software solutions that can be implemented quickly, while avoiding the incremental infrastructure costs and eliminating the ongoing administrative resources of traditional on-premise applications.

Despite the fact that companies have become more reliant on sophisticated software such as customer relationship management (CRM), ecommerce and workforce performance management (WPM) to run their business, a majority of these organizations are dissatisfied with their return on investments. Corporate executives are frustrated with the time, effort and cost required to deploy new business applications, as well as the ongoing resources consumed to keep them up and running, plus the cost to stay innovative.

SaaS is enabling large companies to more quickly deploy business software, more easily administer these applications, obtain best-in-class capabilities and redirect their scarce resources to strategic initiatives, such as business process improvement.

Benefits of the SaaS model include:

• Rapid application deployment and reduced complexity
• Reduced Risk due to lower initial costs and consistent, usage-based billing
• Freedom to focus on core business
• Reliability and scalability
• Automatic updates and patch management
• Global accessibility