What is SaaS?

SaaS stands for Software-As-A-Service and it is a rapidly expanding business model for distributing software. Traditionally you bought software from a vendor and installed it on your computer. With the SaaS model, instead of installing the software on your computer, you visit the vendors web site where you use the software. For example, Google now offers a Saas version of Microsoft Word and Excel. Instead of buying CDs and then loading the software on your PC, you go to docs.google.com and use your user name and password to access all your documents and spreadsheets. The simplicity of this model is why almost all major software companies are investing heavily in the SaaS model including, Google, Microsoft, Oracle, QuickBooks and hundreds of others. There are several advantages to this model:

• There is no software to load on your computer.
• Because the software vendor doesn't have to make and ship CDs, the cost is much more affordable.
• The application is available from any PC with Internet since the files live on a web server and not on a specific PC.
• You get contant upgrades. Since the software vendor doesn't have to ship you a CD each time an upgrade comes out, it becomes much easier to give customers free upgrades for life.

Quotes on the SaaS business model:

• "SaaS is the future of the software business."
  -Mike Fitzgerald, Venture Capitalist, founder of Commonwealth Capital Ventures

• “Perhaps I've drunk the Kool-Aid on SaaS, but the model just makes so much intuitive sense. Pricing is more predictable. Deployments and upgrades are faster and easier.”
  -Information Week Magazine, 11/12/07

• “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…
  
  

"For years, organizations of all sizes have suffered the hassles and unexpected costs that accompany deploying and maintaining a variety of traditional software applications that, ironically, were intended to make them more productive. Now a new breed of Web-based services are pushing legacy applications aside and finally giving users the business benefits they've been seeking…"

"These companies have recognized the inherent inefficiencies of the traditional software market, including the tremendous time, effort, and cost that organizations -- especially large-scale midsize businesses -- have to expend to install applications and keep them up and running…"

"While SaaS isn't a new idea, the economic climate and rapid advancements in application development tools have combined to make today's SaaS providers more successful than their predecessors…"

"Companies of all sizes are taking advantage of SaaS. The scalability of the new generation of SaaS solutions enables users to test the reliability and performance of on-demand applications in limited deployments, and expand their adoption incrementally…"

"SaaS solutions are emerging to address nearly every business application need…"
-Business Week Magazine, 4/17/06

• "Salesforce.com drew snickers a few years ago when it came up with its model of allowing customers to essentially rent the company's enterprise software over the Web. Among other things, some observers predicted that Salesforce's programs for managing basic business functions like sales and customer service would jam up customers' networks. But because of the growth in bandwidth and cheap storage, that never emerged as a serious issue. Delivery over the Web reduces Salesforce's distribution costs to next to nothing. And the company is sizzling: Its first-quarter profits rose 10-fold year over year to $4.4 million, its revenue jumped 84 percent to $64.2 million, and its stock is up 24 percent this year to about $21 a share. Salesforce is still relatively small, but its impact could be huge: Other software makers, from Siebel to Oracle, have begun to sell programs the same way. "Customers are in open rebellion over the high cost of enterprise software," says Salesforce CEO Marc Benioff."
  -CNN/Business 2.0 Magazine, July 2005