On Demand Blogging by Stephen Pech

Despite the enormous buzz around SaaS I am still regularly asked for an overview of what it is, what it means to the user, and how it is different from the ASP model.  Because Software as a Service is a community idea, with many different takes on ideology and implementation it is not always easy to define, but one point I always try to relate is that is that SaaS is the next step in the continuing maturity of both information technology and business services, not a deviation away from it.  In this article I a trying to give a quick entree into SaaS for the business men and women as yet unaffected by it.

What it is

Software-as-a-Service (SaaS) is a software application delivery model where a software vendor develops a remote access capable software application and hosts and operates the application for use by its customers, who pay not for a license, but for use or benefit derived (taken from the NexGen website).  Also see Wikipedia SaaS entry .  For a technical definition I find this list of characteristics very useful:

• Remote web or network-based access
• Multi-tenant architecture to permit multiple clients to access the same system
• Payment flexibility and advantages over the traditional software model
• External and centrally controlled hosting and management by the service provider

What it means to the user

It means no local installation, operation outside the firewall, no maintenance, no upgrade costs, no CapEx, less technical resource issues, a single point of responsibility for each process area, and quick relevant product iterations.

The buzz

SaaS is not just the future anymore, it’s now.  Gartner predicts that Software as a Service will be 25% of total new software revenue in 2011, it has crossed the chasm of acceptance and is now mainstream, and 80% of US CIO’s have it on their implementation list for 2008.  Dell and Microsoft are buying SaaS companies all over the place.

SaaS and ASP

The Software as a Service model is the mature realistic version of the old ASP model with the addition of web and platform technology which caught up allowing the interface to be usable and quick, and the platform to be multi-tenanted (multiple customers on the same system) which means more efficient cheaper operation.  SaaS also has generally moved the system hosting and management responsibility over to the software developer, and away from the local provider who generally managed it in the ASP model.  It will always be that a product consumer will want to do as little as possible more than their core competency, and Software as a Service is one step closer to that.

The customers perception of the difference between ASP and SaaS is simple

• The technology has improved
• People’s perceptions of Web security has improved
• Web access is nearly ubiquitous
• Multi-tenancy technology means more efficient and lower costs (this is important as many users can use the one system just with data and access privileges divided).

The industry

Originally chartered by companies extending the business outsourcing model such as ADP,  SaaS has spread into all sectors of business process, including verticals (a department such as HR), horizontals (a single solution for all users such as email) and niche areas (email especially for HR).  Now that SaaS has proven itself and “crossed the chasm” (at least in U.S. it has – here in Asia Pacific we’re beginning our run up to make the jump), the Platform wars are beginning - the Web has been chosen as the user interface but the back end for the applications to run on is still an open race.

SaaS in Asia and the Pacific

Though currently behind in terms of Software as a Service adoption, our Asia Pacific region is likely to be a future SaaS driver.  Developing economies mean new companies with no legacy systems and a desire to catch up quickly with the best technology.  They also mean new public infrastructure such as internet access via technologies like WiMAX producing a leap frog effect.  Also the explosive growth in the region and some local accounting practices that encourage software to be treated as OpEx rather than CapEx add to the expectations in the region.

Summary 

Software as a Service has an enormous amount of buzz because of the benefits to user organisations such as cost efficiency, increased mobility, payment flexibility, and superior externally managed systems.  For an in depth look at the forces behind Forces behind SaaS see the article on SaaS as a maturation of business processes.

 * I also post versions of relevant AsiaPacific articles from this this blog on the SaaS Asia Pacific Community site.