Software as a service (SaaS, typically pronounced 'sass') is a model of software deployment over the internet. With SaaS, a provider licenses an application to customers for use as a service on demand, either through a time subscription or a “pay-as-you-go” model. Also known as “software on demand,” the SaaS model allows vendors to develop, host and operate software for customer use. Rather than purchase the hardware and software to run an application, customers need only a computer or a server to download the application and internet access to run the software. The software can be licensed for a single user or for a group of users.
SaaS software vendors may host the application on their own web servers or upload the application to the consumer device, disabling it after use or after the on-demand contract expires. While SaaS was widely deployed initially for sales force automation and Customer Relationship Management (CRM), its use has become commonplace by businesses for tasks such as computerized billing, invoicing, human resource management, service desk management, and sales pipeline management, among others.
Key Characteristics
Characteristics of SaaS include:
Network-based access to, and management of, commercially available software
Activities managed from central locations rather than at each customer's site, enabling customers to access applications remotely via the Web
Application delivery typically closer to a one-to-many model (single instance, multi-tenant architecture) than to a one-to-one model, including architecture, pricing, partnering, and management characteristics
Centralized feature updating, which obviates the need for end-users to download patches and upgrades.
Frequent integration into a larger network of communicating software - either as part of a mashup or as a plugin to a platform as a service. (Service oriented architecture is naturally more complex than traditional models of software deployment.)
In addition to the characteristics mentioned above, SaaS software turns the tragedy of the commons on its head and frequently has these additional benefits:
More feature requests from users since there is frequently no marginal cost for requesting new features;
Faster releases of new features since the entire community of users benefits from new functionality; and
The embodiment of recognized best practices — since the community of users drives the software publisher to support best practice.
Benefits
Save Money
Save Time
Focus Budgets on Competitive Advantage rather than Infrastructure
Pay as you go -costs that scale with demand without upfront capital investment.
Multi-Tenant Efficiency
Flexibility and Scalability
Implementation
SaaS architectures can generally be classified as being at one of four "maturity levels", whose key attributes are configurability, multi-tenant efficiency, and scalability. Each level is distinguished from the previous one by the addition of one of those three attributes:
Level 1 - Ad-Hoc/Custom: At the first level of maturity, each customer has its own customized version of the hosted application and runs its own instance of the application on the host's servers. Migrating a traditional non-networked or client-server application to this level of SaaS typically requires the least development effort and reduces operating costs by consolidating server hardware and administration.
Level 2 - Configurable: The second maturity-level provides greater program flexibility through configurable metadata, so that many customers can use separate instances of the same application code. This allows the vendor to meet the different needs of each customer through detailed configuration options, while simplifying maintenance and updating of a common code base.
Level 3 - Configurable, Multi-Tenant-Efficient: The third maturity level adds multi-tenancy to the second level, so that a single program instance serves all customers. This approach enables more efficient use of server resources without any apparent difference to the end user, but ultimately comes up against limits in scalability.
Level 4 - Scalable, Configurable, Multi-Tenant-Efficient: The fourth and final SaaS maturity level adds scalability through a multitier architecture supporting a load-balanced farm of identical application instances, running on a variable number of servers. The provider can increase or decrease the system's capacity to match demand by adding or removing servers, without the need for any further alteration of applications software architecture.
SaaS architectures may also use virtualization, either in addition to multi-tenancy, or in place of it. One of the principal benefits of virtualization is that it can increase the system's capacity without additional programming. On the other hand, a considerable amount of programming may be required to construct a more efficient, multi-tenant application. Combining multi-tenancy and virtualization provides still greater flexibility to tune the system for optimal performance. In addition to full operating system-level virtualization, other virtualization techniques applied to SaaS include application virtualization and virtual appliances.
The development of SaaS applications may use various types of software components and frameworks. These tools can reduce the time-to-market and the cost of converting a traditional on-premise software product or building and deploying a new SaaS solution. Examples include components for subscription management, grid computing software, web application frameworks, and complete SaaS platform products.
User satisfaction
Gartner's 2008 survey of 333 enterprises in the US and UK found a low level of approval from customers, describing overall satisfaction levels as "lukewarm". Respondents who had decided against SaaS cited high cost of service, difficulty with integration, and technical requirements.
A recent report from Forrester, “The ROI of Software-As-A-Service,” examined a range of companies that chose SaaS solutions and found that SaaS does in fact result in long-term value.
Companies interviewed for the report cited several reasons for their ROI of SaaS:
Rapid deployment
Increased user adoption
Reduced support needs
Lower costs for implementation and upgrades
Provider Types
There are several forms of ASP business. These are:
A specialist or functional ASP delivers a single application, such as credit card payment processing or timesheet services;
A vertical market ASP delivers a solution package for a specific customer type, such as a dental practice;
An enterprise ASP delivers broad spectrum solutions;
A local ASP delivers small business services within a limited area.
Some analysts identify a volume ASP as a fifth type. This is basically a specialist ASP that offers a low cost packaged solution via their own website. PayPal was an instance of this type, and their volume was one way to lower the unit cost of each transaction.
In addition to these types, some large multi-line companies (such as IBM), use ASP concepts as a particular business model that supports some specific customers.
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