SaaS: The staying power of this new breed of Web-based software

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by: Christian Smagg

Software-as-a-service (SaaS) is representing a fundamental shift in how software is acquired, implemented, used and paid for. Already considered as an established alternative model in the US, SaaS is starting slowly to be recognized as an interesting model in Europe.


SaaS is not just hype and most Internet users have actually already used SaaS without being aware of it. But let’s first start with this simple definition provided by InfoClipz, delivered by as part of their “Information Technology explained in 3 minutes or less!” series.

The staying power of SaaS, as opposed to other software delivery models, has arisen for several reasons:

– Easy set-up and customization,
– Low cost of entry,
– Predictable expense,
– Less risky investment,
– Easy to walk away from,
– Mobility,
– Smoother upgrades,
– Reduced overhead.

For years, organisations of all sizes have suffered the hassles and unexpected costs that accompany deploying and maintaining a variety of traditional softwares that were intended to make them more productive. Now a new breed of Web-based services are pushing this type of traditional applications aside and finally giving users the business benefits they were seeking.

The inherent inefficiencies of the traditional softwares, including the tremendous time, effort, and cost that organizations usually have to expend to install applications and keep them up and running, have finally been recognized. SaaS not only alleviates the costs of traditional licensing fees but also eliminates the need for additional IT infrastructure investments to support new applications. A variety of enabling technologies, such as service-oriented architecture (SOA) and Web services, enable SaaS to be more easily provisioned and metered based on actual usage levels. This means companies no longer have to pay for excess capacity. The bottom line? Lower total cost of ownership and quicker time-to-value. The scalability and flexibility of this new generation of SaaS solutions enable users to test the reliability and performance of on-demand applications in limited deployments, and expand their adoption incrementally. While SaaS certainly makes sense for many front-office functions (such as CRM for example) and team-oriented collaboration purposes, SaaS solutions are emerging to address nearly every business application need.

“SaaS-ification” will likely develop into a bona fide institution over the next several years. In this respect, analysts suggest 2007 could be a signal year in SaaS expansion and adoption. IDC, for example, lists SaaS growth and adoption as one of its big trends to watch in 2007 and expects SaaS to be a $10 billion market within three years. Gartner Group predicts that SaaS is primed for enormous expansion: growing from just 5 percent of software revenues in 2005 to nearly a third of all software revenues by the end of the decade. 84% of small and mid size companies and 69% of large companies are willing to consider, currently reviewing or already using SaaS solutions.

As SaaS gains mainstream acceptance, it is becoming an important disruptive force in the software industry. And as long as the quality and reliability of SaaS solutions continues to improve, the appeal of SaaS isn’t going to go away.

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