Welcome to the world of SaaS

SaaS -- Software as a service is a new buzzword in the IT industry. Many enterprise companies are using the new software delivery model one way or the other. This post will give a brief overview of what SaaS is all about.

Let’s begin our journey to explore SaaS

An often used example of a SaaS application is Hotmail -- an email service.

Let’s look at the definition of SaaS

From Wikipedia
"Software as a Service (SaaS) is a model of software delivery where the software company provides maintenance, daily technical operation, and support for the software provided to their client. SaaS is a model of software delivery rather than a market segment; software can be delivered using this method to any market segment including home consumers, small business, medium and large business." A good definition, which captures the key characteristics of a SaaS application 1. Delivered over internet
2. Installed and Managed centrally and not at the customer's site
3. Suitable for both SMB’s and large business 4. The other key characteristic for SaaS applications is that they are built to be delivered in a one to many model rather than a one-one model.

Let’s look at the evolution of SaaS

Traditional on-premise applications were installed and managed internally by the customers. This involved huge IT investments and managing a big IT team. In this model it was generally felt that the IT infrastructure was not completely utilized and they were not getting expected ROI from their investments. Also, Investing and managing a big IT infrastructure was a big challenge for SMB’s.

On-premise application solved one concern – the software infrastructure required to run a business function, but introduced new concerns on procuring and managing IT infrastructure. The customer who only required the software has to now invest on IT and support for the software – big overhead for anyone to use the software.

When some CIO looked at this and asked, why I should have a huge IT infrastructure, ASP’s were born, wherein the Service providers take care of hosting and managing the application. This still didn’t solve the CIO’s problem as his costs more or less remained the same, only his concern on managing the IT team and the software application got outsourced. ASP’s operated typically in a one-one model – A dedicated infrastructure and support for each customer, because of which optimization points were less.

CIO’s were still not happy as they didn’t get any major cost saving. This led to a new software delivery model SaaS (Software-as-a-Service), where the applications were delivered over internet, which were consumed in a one-to-many model. Pricing is primarily subscription based or based on the usage. The cost of software and the hosting fees are not differentiated; customers pay only for the software service they use.

Now can you relate to why Hotmail is considered as one of the first SaaS Application?

Let's look at benefits and challenges of this new delivery model in the next post.

Technorati Tags: SaaS, Software as a Service