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Technology

Software as a Service (SaaS)

Dolly Bhasin
May 2009

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In the economic downturn, the Small and Medium Enterprises are struggling to contain costs and still not compromise on the quality of the output. While SMEs have started realising the advantage of using ICT for their operations, they are faced with a challenge of not just reducing or not making fresh IT capital investments (CAPEX) but also reducing the operating expenses (OPEX) to the bare minimum in this time of downturn.

New IT delivery models such Software as a Service (SaaS) are becoming more attractive in tighter economic times, as they represent a partial opportunity to avoid up-front costs compared to traditional acquisition models.

Use of software as a service (SaaS) has been evolving during the past decade, and this model has become increasingly popular during the last three to four years. As per Gartner's survey worldwide in 2008, more than 40% of organizations have used SaaS for more than three years, implying a growing acceptability of the model within the SMEs.

This month, we look at how SMEs can benefit from this application and save on the deployment costs (both CAPEX and OPEX) and still benefit from ICT.

What is SaaS?

Software as a Service (SaaS), is a model of software deployment whereby a provider licenses an application to customers for use as a service on demand. SaaS software vendors may host the application on their own web servers or download the application to the consumer device, disabling it after use or after the on-demand contract expires. SaaS is also sometimes referred to as “APPs on TAPs”, i.e. applications that are available to end user like a tap, which can be tapped as and when required.

As a term, SaaS is generally associated by software professionals and business associates with business software and is typically thought of as a low-cost way for businesses to obtain rights to use software as needed versus licensing all devices with all applications. The 'On Demand' licensing enables the benefits of commercially licensed use without the associated complexity and potential high initial cost of equipping every device with the applications that are only used when needed.

Examples of SaaS vendors include Salesforce, Zoho, SAP Business ByDesign and Google Apps, which provide common business applications online that, are accessed from a web browser, while the software and data are stored on the servers. The payments and licenses are generally based on a one - time configuration payments and a monthly/annual payment model. However, some applications like web collaboration tools (WEBEX, ELLUMINATE); Learning Products and Data conversion products are deployed on a need basis, and have a pay per use model.

Gartner defines SaaS use as

• An application owned, delivered and managed remotely by one or more providers

• Where the provider delivers an application based on a single set of common code and data definitions, which are consumed in a one-to-many model by all contracted customers at any time

• On a pay-for-use basis or as a subscription based on use metrics

Key Characteristics of SaaS

The main Characteristics of SaaS software include

• Network-based access to and management of, commercially available software

• Most activities managed from central locations rather than at each customer's site, enabling customers to access applications remotely via the Web

• Application delivery typically closer to a one-to-many model rather than to a one-to-one model, including architecture, pricing, partnering, and management characteristics

• A Centralized feature updating, which makes the end-users transparent to them and they do not have to download patches and upgrades.

• Frequent integration into a larger network of communicating software - either as part of a mashup or as a plugin to a platform as a service.

• Offered by even SMEs to reach to global audience.

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