When Software-as-a-Service Makes Sense

There is much buzz about this deployment option. But is it right for your company?


By Liz Herbert

Software-as-a-service (SaaS) continues to create buzz in the software industry as firms increasingly choose SaaS as their preferred deployment option. Some SaaS vendors like salesforce.com tout it as a revolution in computing that will be "the end of software." Others are leery, wondering whether SaaS will go out of fashion the way application service providers (ASPs) did at the beginning of the decade. And many firms are simply confused by the terms since SaaS is used to refer to many different software approaches such as Web-based consumer applications like those of Google and eBay, computing/processing services like the Sun Utility Grid, or Web-based business software from vendors like salesforce.com, NetSuite and SuccessFactors.

Before firms can decide whether SaaS is a good fit for their needs, they must first understand what it is and how it relates to other deployment models. Key characteristics that distinguish SaaS from alternate deployment approaches include tenancy, pricing model, upgrades, number of contracts required and license ownership. In its most rigid definition, SaaS is built from the ground up to be multi-tenant at all layers of the stack: database, server and application. All users run the same code with "customizations" stored as metadata parameters rather than distinct code bases. SaaS is typically sold on a subscription or term license basis that includes upgrades, maintenance and usually some level of support. SaaS vendors typically deliver two to four major upgrades per year and several minor updates that the user gets automatically. SaaS is usually delivered by the same vendor that creates the software.

SaaS differs from ASP because the latter typically refers to applications built in client-server, single-tenant architecture that are being exposed to customers as an on-demand service, often by a third party rather than the vendor that created the software. Like SaaS, the ASP model typically allows firms to access software through a Web client on a subscription basis with zero need for IT. However, there are several key differences. First, upgrades to ASP offerings follow a similar schedule to traditional licensed applications: typically one upgrade every 12 to 18 months with patches and bug fixes released in between, rather than the multiple upgrades per year model of SaaS. Additionally, the client or the ASP provider decides when to apply the upgrade and must sometimes recode customizations at upgrade time. Because of this added complexity, ASPs and their clients may sometimes opt to skip upgrades, meaning firms miss out on the latest functionality and usability enhancements.

What SaaS Can Do

Software-as-a-service has democratized the software industry from request for proposal (RFP) to purchase to rollout, empowering business units by enabling them to buy, deploy and run software without IT involvement. With SaaS, line-of-business heads, ranging from the vice president of sales to the director of human resources (HR), can single-handedly own the purchase decision by taking advantage of free trial offers on Web sites to evaluate solutions and paying a monthly or quarterly rate low enough to stay off the corporate radar screen for requiring approvals. Additionally, the easier-to-use and easier-to-administer nature of most SaaS solutions means non-IT users can rely on point-and-click tools and wizards to set up and configure solutions. For many users, SaaS wizards for creating custom reports, changing roles and access rights, and building custom layouts means an end to waiting on an IT project list for days or weeks until resources become available.

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