What Is Software As A Service (SaaS)

Software as a Service (commonly pronounced as ‘SaaS‘) is a model of software deployment where an application hosted as a service provided to customers across the Internet. The key characteristics of SaaS software include: (a) network-based access and management of commercially available software  activities that are managed from central locations rather than at each customer’s site, (b) enabling customers to access applications remotely via the Web.

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. It lowers total cost of ownership over client-installed software. Customers enjoy a single-source accountability. The applications requires few, if there’s any, mostly technical resources to support. And also the greater data accessibility and security of the system.

The rationale for outsourcing of IT systems is that by applying economies of scale to the operation of applications, a service provider can offer better, cheaper, more reliable applications than companies can themselves. The use of SaaS-based applications has grown dramatically, as reported by many of the analyst firms that cover the sector. But it’s only in recent years that SaaS has truly flourished. Several important changes to the way we work have made this rapid acceptance possible.

Key Benefits of SaaS and Cloud Computing

• Lower cost of Ownership. Clients don’t need to buy software licenses and pay annual maintenance. There’s no need to buy and maintain servers/hardwares. Less IT Personnel (or eliminate the need for IT staff). Clients only pay minimal recurring monthly fees or subscriptions.
• Fast Deployment. Deployment for SaaS business softwares (e.g. ERP Software) takes only half or less than half the time it takes to implement traditional business softwares.
• Available anywhere. Gone are the days when businesses have to setup robust and expensive infrastructures just to provide mobility and anywhere access of its applications. SaaS softwares are hosted in secured Datacenters following data security compliance requirements and standards. SaaS providers are also seriously considering business continuity programs to ensure business operations are not affected in cases of server downtimes.

SaaS History

Beginning in 1998, application service providers attracted a great deal of attention to the hosted software space, offering web-based access to applications from major enterprise software vendors on a subscription rather than licensed basis. A select group of firms continued to move the market forward by amending earlier imperfections and validating the business model with an increasingly receptive end-user population. These companies began building new, purely web-based applications that directly addressed important business functions and provided a strong value proposition. Since the second half of 2003, there has been a shift in momentum towards the software as a service model.

Today, Software-as-a-Service (SaaS) is growing in acceptance among IT professionals. With the onset of several initial public offerings and various public companies investing millions of dollars in educating the market, the “pay-as-you-go” model is becoming a strong consideration for many executives forced with a decision of whether to upgrade current software applications and related infrastructures or move to an outsourced model. This shift fundamentally changes roles and responsibilities between software vendors, professional service firms and end-users. An increase in demand for SaaS requires traditional software and service firms to revise market strategies to compete effectively against well-funded competitors. The new generation of SaaS providers represents a crucial next step in the ongoing evolution towards a service-oriented architecture composed of native-web and XML-based web services.

Adopting SaaS is many times fueled by a combination of increased competition, business opportunity outside core markets and limited access to technical resources. It is easier for a service provider to achieve critical mass and profitability while minimizing operating costs by using a stepped approach to  fixed and variable expenses under the SaaS model. As revenue increases through usage, additional investments can be made to expand capacity and enhance redundancy at various levels of operation.

Adapting SaaS can help a vendor reduce entry barriers into new markets by elevating the level of automation and streamlined processes currently in use. Extended functionality, remote application access from virtually anywhere and single-point data entry through data synchronization help build stronger exit barriers for existing users, providing more reasons why a customer would not simply switch to a competitor due to more competitive pricing or other ‘hooks’ being offered.

Check out our SaaS applications and solutions:

• LAMP Enterprise ERP
• vTiger Open CRM

References:

• Wikipedia.com
• Digital Point Forums
• Saas.com/files/whitepapersaas.pdf

Related Articles:

• LAMP Enterprises ERP SaaS: Liberation Is At Hand
• LAMP Enterprise ERP replaces ORACLE at Columbia Autocar
• LAMP Enterprise ERP: Making ERP Business Software Affordable to SME Businesses
• Services
• Contact ERPBiz
• The LAMP Enterprise
• vTiger CRM Software