SaaS

Software as a service (SaaS) is a software application delivery model where a software vendor develops a web-native software application and hosts and operates (either independently or through a third-party) the application for use by its customers over the Internet. Customers do not pay for owning the software itself but rather for using it. They use it through an API accessible over the Web and often written using Web Services or REST. The term SaaS has become the industry preferred term, generally replacing the earlier terms Application Service Provider (ASP) and On-Demand.

History

The concept of "software as a service" started to circulate in 2000/2001 and and was included as a prominent part in the "SIIA Trends Report 2000" [1] of the non-profit Software & Information Industry Association.

The camelback acronym "SaaS" now in widespread use was coined in its popular CamelCase form in a white paper called "Strategic Backgrounder: Software as a Service" [2] by the Software & Information Industry's eBusiness Division published in Feb. 2001, but written in fall of 2000 according to internal Association records.

Philosophy of SaaS

As a term, SaaS is generally associated with business software and is typically thought of as a low-cost way for businesses to obtain the same benefits of commercially licensed, internally operated software without the associated complexity and high initial cost. Consumer-oriented web-native software is generally known as Web 2.0 and not as SaaS. Many types of software are well suited to the SaaS model, where customers may have little interest or capability in software deployment, but do have substantial computing needs. Application areas such as Customer relationship management, Video Conferencing, Human Resources, IT Service Management, Accounting and Email are just a few of the initial markets showing SaaS success. The distinction between SaaS and earlier applications delivered over the Internet is that SaaS solutions were developed specifically to leverage web technologies such as the browser, thereby making them web-native.

Key characteristics of software delivered by SaaS

The key characteristics of SaaS software, according to IDC, include:[3]

- network-based access to, and management of, commercially available (i.e., not custom) software

- activities that are managed from central locations rather than at each customer's site, enabling customers to access applications remotely via the Web

- application delivery that typically is 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 downloadable patches and upgrades.

SaaS applications are generally priced on a per-user basis, sometimes with a relatively small minimum number of users, and often with additional fees for extra bandwidth and storage. SaaS revenue streams to the vendor are therefore lower initially than traditional software license fees, but are also recurring, and therefore viewed as more predictable, much like maintenance fees for licensed software.