SaaS (Software as a Service)

What is Software as a Service?

Software as a Service (SaaS), also known as software on demand, is a new model causing a profound change in application delivery and consumption. SaaS refers to a software or application hosted on a remote server that is accessed via a web browser, typically on a subscription basis. The simplest example of SaaS is the free web-based email system offered by Windows Live Mail, G-mail and Yahoo Mail. All the software and data resides in one central server and is accessed by end users through the worldwide web.

SaaS is seldom divided into two major categories. The first category refers to business solutions sold to companies and enterprises on a subscription basis. Applications in this category generally cover business processes such as supply-chain management (SCM) programs, customer relations applications (CRM) and others. The second category includes customer oriented services offered to individuals, either on a subscription basis or for free (supported by advertising). Web-based email services such as those cited above fall into this category.

Traditional Delivery Model Vs SaaS Delivery Model

The SaaS model is fundamentally different from the traditional model of application delivery, in which the customer purchases a software package and license by paying a one-time fee. The software thereby becomes the property of the user and regular software support and updates are provided by the vendor. In contrast, SaaS does not have licenses or one-time fees; payment for the use of software is done through subscription. Moreover, the software is accessed and used through the internet and is not loaded or stored on the users’ computer.

Benefits

From a customer perspective, SaaS is simply an easier, faster, and more cost-effective way of using software. It eliminates the high costs associated with acquiring hardware and setting up of infrastructure. Another plus point lies in the fact that SaaS providers are being constantly judged on a month-to-month basis and are often pressurised to produce rapid improvements in order to retain their clients. SaaS thereby transitions the responsibility of deployment and management of software from the customer to the software vendor.

Software companies themselves can also benefit significantly from the SaaS model. SaaS expands sales opportunities, enhances competitive differentiation and provides new revenue streams. By offering SaaS, large companies can tap and capture revenue from the small and medium sized businesses (SMEs) that may have been previously unable to afford the investment necessary to acquire perpetual licenses. Conversely, smaller software companies and new entrants that are exclusively delivering SaaS can more effectively compete with the larger vendors. SaaS also eliminates end-of-quarter discounting pressures and enables software companies to enjoy predictable streams of recurring revenue and growth rates. Furthermore, SaaS helps in mitigating piracy and unlicensed use of software thereby reducing losses associated with such activities.

Challenges

In the rush to adopt the software-as-a-service model, many vendors and their customers are overlooking the difficulty in shifting to the platform of the Web. The Web as a platform has its own set of challenges which  includes different security, interface issues, and multi-tenancy.

Security: Since a single application instance caters to requests of all clients, it is important that there is a mechanism in place to ensure that data of each client remains secured and users of a particular client can access data meant for them alone.

Interface: Incorporating user interface (UI) configuration capabilities according to individual client requirements forms another challenge to building a SaaS application. Additionally the UI must be simple, speedy and easy to use. Most SaaS players often create a much too complex and busy interface, which translates into training and productivity challenges for end users.

Multi-Tenancy: Multi-tenancy is by far the most difficult challenge when implementing SaaS. Multi-tenancy puts data at the centre of an application, which requires partitioning the physical database to support this structure and allocating space as subscribers come on board. The primary challenge with multi-tenant architecture is that the database is typically the heart of any enterprise application, and changing the database architecture means changing the core application.

Future Outlook

Software as a Service (SaaS) is fundamentally changing the way people and organizations work, enabling greater degrees of collaboration and restructuring everything from business and operational processes to the way software is licensed and priced. The day is not too far when all businesses will be renting out software from a SaaS vendor who can deliver value, reliability, and security all at a fraction of the cost.