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Software as a Service (SaaS)

Traditionally, companies have purchased or developed their own software, run it on enterprise infrastructure and done the necessary tasks for its maintenance and upgrades. Software as a Service or SaaS shows the way for a systems model where companies need not buy and install expensive packages (enterprise applications) but can access and use remotely hosted software over a network. Companies no longer pay to 'buy' a software application, they pay to 'use' it.

SaaS is a new software distribution model where a software vendor or service provider hosts the application and makes it available to customers over a network, typically the Internet. SaaS allows organizations to access application functionality at lower costs with no investment in both software or in additional hardware. Also, because the software is hosted remotely, users need no longer worry about installation, set-up, licenses, training and maintenance. All they need to do is pay a monthly or per-use fee to the vendor who in turn does everything from hosting to maintenance and upgrades of the software.

SaaS derives its name from the fact that the software vendor hosts the application and makes it available to customers as a 'service' rather than a product. SAAS goes under many other names as well: On-demand applications, on-demand software, hosted services, hosted software, utility computing, or software-on-demand. But the fundamental idea behind all of these is the same: a software provider is responsible for the availability, maintenance, scalability, disaster recovery, upgrade etc. of an application. That's what users are paying for.

The IDC identifies two types of SaaS delivery models:

  • The hosted application management (hosted AM) model is similar to ASP where a provider hosts commercially available software for customers and delivers it over the Web.
  • The software-on-demand model, the provider gives customers network-based access to a single copy of an application created specifically for SaaS distribution.

SaaS Payment Modes: SaaS vendors are compensated by users for the use of the hosted software. Payments can be either on a pay-per-use basis or as a monthly payment. Some SaaS applications are available completely free of charge while others are open source (the customer decided where to host the application). But the one thing all SaaS applications have in common is that they are all delivered as web applications to the browser.

How SaaS will Affect Enterprises

Also heralded as the web 2.0, SaaS software service marketing is predicted to launch a new generation of powerful applications that give greater control to the user. With the SaaS model, users will be able to use lower-grade hardware for applications that were previously out of their reach. SaaS also promises to take away the user worries about the complexity of the application, need for overhauling hardware installations, maintenance hassles, TCO, hardware crashes and down time. Enterprises can save huge amounts that would have otherwise gone towards licenses, training and implementation. Now, with a few clicks, you are in business - thanks to Web-based firms such as that host the software at their offices, allowing users access over the Internet, using a browser.

SaaS vs. ASP

In the 1990s, ASP (application Service Providers) took software delivery to the next level by offering packaged or shrink-wrapped software to customers over the internet. SaaS is closely related to the ASP (application service provider) and on-demand computing software delivery models.

Though often mistaken to be the same as SaaS, ASPs differ from SaaS in many ways. ASPs usually deal in packaged software only while SaaS offers custom developed applications as well. The licensing and architectural modalities as well as the cost implications of ASPs are the same as on-premise software. Most significantly, applications offered by ASPs are designed as single tenant applications with limited capabilities towards sharing data and processes with other applications.

Software as a Service: Business Models for the Future

According to predictions by the IDC, SaaS revenues are poised to touch $10.7 billion by 2009. Small and Medium (SMB) businesses are seen to be a driving force behind SaaS as these companies can access all functionalities of the software without having to invest in it.

There are many industries that are predicted to transition to SaaS model. Voice over Internet Protocol (VoIP), travel and tourism, e-shops, online shopping engines and e-commerce are industries that are expected to transition to the SaaS model. The use of SaaS in publishing is also becoming evident with e-books that can be bought and read on the Internet becoming increasingly available.

The following are key among them:

  • Conferencing applications
  • SFA (Sales Force Automation) software
  • CRM software
  • Core banking systems
  • Call management solutions
  • Travel services
  • Financial models
  • e-Learning solutions
  • Online banking systems
  • Share trading systems

SAAS or hosted software development is becoming prevalent as broadband connectivity to the internet, technologies that support web services and new developmental approaches such as Ajax become more popular.

Read more about outsourcing content management systems to O2I.

Read about Service Oriented Architecture (SOA).

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