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Software as a service (SaaS, typically pronounced 'sass') is a model of software deployment over the internet. With SaaS, a provider licenses an application to customers for use as a service on demand, either through a time subscription or a “pay-as-you-go” model. Also known as “software on demand,” the SaaS model allows vendors to develop, host and operate software for customer use. Rather than purchase the hardware and software to run an application, customers need only a computer or a server to download the application and internet access to run the software. The software can be licensed for a single user or for a group of users.

SaaS software vendors may host the application on their own web servers or upload the application to the consumer device, disabling it after use or after the on-demand contract expires. While SaaS was widely deployed initially for sales force automation and Customer Relationship Management (CRM), its use has become commonplace by businesses for tasks such as computerized billing, invoicing, human resource management, service desk management, and sales pipeline management, among others, according to a January 2010 Information Week article.

Objectives

The sharing of end-user licenses and on-demand use may also reduce investment in server hardware or the shift of server use to SaaS suppliers of applications file services. Using a SaaS product can reduce hiring costs.

History

An article called "Strategic Backgrounder: Software as a Service", was claimed by the author to be internally published in February 2001 by the Software & Information Industry's (SIIA) eBusiness Division.

Loudcloud, founded in 1999 by Marc Andreessen, was one of the first to attempt to commercialize Software as a Service computing with an Infrastructure as a Service model. The technology also was called "ASP's" or Application Service Providers, under the terminology of the day. According to Wired Magazine, LoudCloud was one of the first vendors to talk about cloud computing and SaaS. Loudcloud changed its name to Opsware after selling the operations side of the business to EDS in 2002, and HP acquired Opsware in 2007 and EDS in 2008. HP now offers the SaaS originally developed by Loudcloud as HP Software-as-a-Service.

Philosophy

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. 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.

Some software fits the SaaS model. Many Unix applications already have this functionality whereas EULA applications never had this flexibility before SaaS. A licensed copy of a word processor, for example, had to reside on the machine to create a document. The equipped program has no intrinsic value loaded on a computer that is turned off for the night. Worse yet, the same employee may need another fully paid license to write or edit a report at home on their own computer, while the work license is inoperative. Remote administration software attempts to resolve this issue through sharing CPU controls instead of licensing on demand. While promising, it requires leaving the licensed host computer on and it creates security issues from the remote accessing to run an application. SaaS achieves efficiencies by enabling the on demand licensing and management of the information and output, independent of the hardware location.

SaaS applications differ from earlier applications delivered over the Internet in that SaaS solutions were developed specifically to leverage web technologies such as the browser, thereby making them web-native. The data design and architecture of SaaS applications are specifically built with a 'multi-tenant' backend, thus enabling multiple customers or users to access a shared data model. This further differentiates SaaS from client/server or 'ASP' (Application Service Provider) solutions in that SaaS providers leverage enormous economies of scale in deployment, management, and support throughout the Software Development Lifecycle.

Key characteristics

Characteristics of SaaS include:

• network-based access to, and management of, commercially available software
• 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 (single instance, multi-tenant architecture) than to a one-to-one model, including architecture, pricing, partnering, and management characteristics
• centralized feature updating, which obviates the need for end-users 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. (Service oriented architecture is naturally more complex than traditional models of software deployment.)

Providers of SaaS generally price applications on a per-user basis, sometimes with a relatively small minimum number of users and often with additional fees for extra bandwidth and storage. SaaS revenue streams to the vendor are therefore lower initially than traditional software license fees, but are also recurring, and therefore viewed as more predictable, much like maintenance fees for licensed software.

In addition to the characteristics mentioned above, SaaS software turns the tragedy of the commons on its head and frequently has these additional benefits:

• More feature requests from users since there is frequently no marginal cost for requesting new features;
• Faster releases of new features since the entire community of users benefits from new functionality; and
• The embodiment of recognized best practices — since the community of users drives the software publisher to support best practice.

Benefits

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• Save money by not having to purchase servers or other software to support use, everything runs from the browser
• Focus Budgets on competitive advantage rather than infrastructure
• Monthly obligation rather than up front capital cost
• Reduced need to predict scale of demand and infrastructure investment up front as available capacity matches demand
• Multi-Tenant efficiency
• Flexibility and scalability
• Easy to use

Implementation

SaaS architectures can generally be classified as being at one of four "maturity levels", whose key attributes are configurability, multi-tenant efficiency, and scalability. Each level is distinguished from the previous one by the addition of one of those three attributes:

• Level 1 - Ad-Hoc/Custom: At the first level of maturity, each customer has its own customized version of the hosted application and runs its own instance of the application on the host's servers. Migrating a traditional non-networked or client-server application to this level of SaaS typically requires the least development effort and reduces operating costs by consolidating server hardware and administration.

• Level 2 - Configurable: The second maturity level provides greater program flexibility through configurable metadata, so that many customers can use separate instances of the same application code. This allows the vendor to meet the different needs of each customer through detailed configuration options, while simplifying maintenance and updating of a common code base.

• Level 3 - Configurable, Multi-Tenant-Efficient: The third maturity level adds multi-tenancy to the second level, so that a single program instance serves all customers. This approach enables more efficient use of server resources without any apparent difference to the end user, but ultimately comes up against limits in scalability.

• Level 4 - Scalable, Configurable, Multi-Tenant-Efficient: The fourth and final SaaS maturity level adds scalability through a multitier architecture supporting a load-balanced farm of identical application instances, running on a variable number of servers. The provider can increase or decrease the system's capacity to match demand by adding or removing servers, without the need for any further alteration of applications software architecture.

SaaS architectures may also use virtualization, either in addition to multi-tenancy, or in place of it. One of the principal benefits of virtualization is that it can increase the system's capacity without additional programming. On the other hand, a considerable amount of programming may be required to construct a more efficient, multi-tenant application. Combining multi-tenancy and virtualization provides still greater flexibility to tune the system for optimal performance. In addition to full operating system-level virtualization, other virtualization techniques applied to SaaS include application virtualization and virtual appliances.

The development of SaaS applications may use various types of software components and frameworks. These tools can reduce the time-to-market and the cost of converting a traditional on-premise software product or building and deploying a new SaaS solution. Examples include components for subscription management, grid computing software, web application frameworks, and complete SaaS platform products.

SaaS and SOA

Much like any other software, Software as a Service can also take advantage of Service Oriented Architecture to enable software applications to communicate with each other. Each software service can act as a service provider, exposing its functionality to other applications via public brokers, and can also act as a service requester, incorporating data and functionality from other services. Enterprise Resource Planning (ERP) Software providers leverage SOA in building their SaaS offerings; an example is SAP Business ByDesign from SAP AG.

Software as a Secure Service (SaSS)

Software as a secure service (SaSS) is a derivative of software as a service. Denotes a class of software as a service which emphasizes security, not only in the link to and from the service, and the storage of any content by the software providing the service, but also in the security of the user in terms of the ability to make consistent backups and restores of any data stored in the service, in a non-proprietary format. In other words, security in transmission, storage and control over the user's own data.

Adoption

Drivers

The traditional rationale for outsourcing of IT systems involves applying economies of scale to the operation of applications, such that a service provider can offer better, cheaper, more reliable applications than companies can themselves. The use of SaaS-based applications has grown dramatically, and a Gartner survey in July 2009 found that customers are "somewhat satisfied". Several important changes to the way people work have made this rapid acceptance possible:

• The spread of fast and low cost broadband.
• Computers have become widespread: Most information workers have access to a computer and are familiar with conventions from mouse usage to web interfaces. As a result, the learning curve for new applications is lower and less hand-holding by internal IT is needed.
• Computing itself has become a commodity: In the past, corporate mainframes were jealously guarded as strategic advantages. More recently, the applications were viewed as strategic. Today, people know it’s the business processes and the data itself—customer records, workflows, and pricing information—that matters. Computing and application licenses are cost centers, and as such, they’re suitable for cost reduction and outsourcing. The adoption of SaaS could also drive Internet-scale to become a commodity.
• Insourcing IT systems requires expensive overhead including salaries, health care, liability and physical building space.
• Applications have tended to standardize: with some notable, industry-specific exceptions, most people spend most of their time using standardized applications. An expense-reporting page, an applicant screening tool, a spreadsheet, or an e-mail system are all sufficiently ubiquitous and well understood that most users can switch from one system to another easily. This is evident from the number of web-based calendaring, spreadsheet, and e-mail systems that have emerged in recent years.
• Parametric applications are usable: In older applications, one could often only change a workflow by modifying the code. But in more recent applications, particularly web-based ones, significantly new applications can be created from parameters and macros. This allows organizations to create many different kinds of business logic atop a common application platform. Many SaaS providers allow a wide range of customization within a basic set of functions.
• A specialized software provider can target global markets: A company that made software for human resource management at boutique hotels might once have had a hard time finding enough of a market to sell its applications. But a hosted application can instantly reach the entire market, making specialization within a vertical market not only possible, but preferable. This in turn means that SaaS providers can often deliver products that meet their markets' needs more closely than traditional "shrinkwrap" vendors could.
• Web systems show reliability: Despite sporadic outages and slow-downs, most people are willing to use the public Internet, the Hypertext Transfer Protocol and the TCP/IP stack to deliver business functions to end users.
• Security is sufficiently well trusted and transparent: With the broad adoption of SSL, organizations have a way of reaching their applications without the complexity and burden of end-user configurations or VPNs.
• Availability of enablement technology: According to IDC, organizations developing enablement technology that allow other vendors to quickly build SaaS applications will play an important role in driving the adoption of SaaS. Because of SaaS' relative infancy, many companies have either built enablement tools or platforms or are in the process of engineering enablement tools or platforms. A Saugatuck study shows that the industry will most likely converge to three or four enablers that will act as SaaS Integration Platforms (SIPs).
• Bandwidth of wide-area networks has grown drastically following Moore's Law (more than 100% increase each 24 months) and is about to reach slow local networks bandwidths. Added to network quality of service improvement this has driven people and companies to trustfully access remote locations and applications with low latencies and acceptable speeds.
• SaaS has the effect of democratizing software, allowing small and medium businesses to have access to functionality formerly the domain of large enterprises. Many analytical software tools have been released as SaaS applications and are available on a monthly subscription basis
• Data Aggregation. Instead of collecting data from multiple data sources, with potentially different database schemas, all data for all customers is stored in a single database schema (i.e. multi-tenant). Thus, running queries across customers, mining data, and looking for trends is much simpler.
• The rise of third-party SaaS data escrow services has reduced some security concerns by allowing application data to be held with an independent third party.

Sales channels

With products focus on the mid market, direct selling can become an expensive undertaking. SaaS companies seek alternatives by selling through value-added resellers (VARs), Managed Service Providers (MSPs), Master Managed Service Providers (MMSPs) and similar alliance partners. But since SaaS is not only a different delivery mechanism but a different business model and different technology as well, selling through channels has its own challenges.

Alternative pricing models

One reason for developing SaaS applications is the opportunity to implement alternative pricing models that focus on establishing and maintaining recurring revenue streams. Most SaaS vendors charge some kind of monthly "hosting" or "subscription" fee. Opportunities also exist to charge per transaction, event, or other unit of value to the customer. These alternative pricing models come about because customers actually "lease" the software from the vendors and the vendors have the ability to view all transactional activity within the system.

User satisfaction

Gartner's 2008 survey of 333 enterprises in the US and UK found a low level of approval from customers, describing overall satisfaction levels as "lukewarm". Respondents who had decided against SaaS cited high cost of service, difficulty with integration, and technical requirements. A recent report from Forrester, “The ROI of Software-As-A-Service,” examined a range of companies that chose SaaS solutions and found that SaaS does in fact result in long-term value.

Companies interviewed for the report cited several reasons for their ROI of SaaS:

• Rapid deployment
• Increased user adoption
• Reduced support needs
• Lower costs for implementation and upgrades

Examples

• Microsoft - Allows customers to create their own software as a service applications
• Google - Google docs gives you access to productivity software online
• AutoPal - Provides a loan management database online

Criticism

Richard Stallman strongly criticizes SaaS. According to Stallman, using SaaS can cause as much harm as proprietary software, since the users can't modify the particular software that they are using, thus, they can't control their own computing.

See also

• Application service provider
• Cloud computing
• Computer user satisfaction
• Mobile enterprise
• Multitenancy
• Online office suite
• Service bureau
• Software plus services
• Supply chain
• Utility computing

References

1. SaaS—Software As A Service. Retrieved 2010-03-05.
2. Why You Need A SaaS Strategy. Michael Biddick. Jan. 16, 2010. Retrieved 2010-03-10.
3. Computeractive.co.uk
4. Wired Magazine|title=Crank it up|author=David Sheff|date=2008-08
5. Crunchbase.com. “Opsware.”
6. “HP Closes EDS Acquisition” news release
7. "The Case for the Fat Start-Up." Wall St. Journal's All Things Digital: 3/17, Ben Horowitz.
8. ^ Traudt, Erin (2005). "2005 Software as a Service Taxonomy and Research Guide". IDC. p. 7. {{cite web}}: |access-date= requires |url= (help); Missing or empty |url= (help); Unknown parameter |coauthors= ignored (|author= suggested) (help); Unknown parameter |month= ignored (help) Cite error: The named reference "IDC" was defined multiple times with different content (see the help page).
9. "Architecture strategies for catching the long tail". 2006. Retrieved 2008-05-24. {{cite web}}: Unknown parameter |month= ignored (help)
10. Wainewright, Phil (2007). "Workstream prefers virtualization to multi-tenancy". Retrieved 2008-05-24. {{cite web}}: Unknown parameter |month= ignored (help)
11. Chong, Fred (2006). "Multi-tenancy and Virtualization". Retrieved 2008-05-24. {{cite web}}: Unknown parameter |month= ignored (help)
12. Schuller, Sinclair (2007). "Repealing the SaaS Tax". Retrieved 2008-05-24. {{cite web}}: Unknown parameter |month= ignored (help)
13. The Overlapping Worlds of SaaS and SOA
14. ^ Gartner Survey Shows Many Users are Underwhelmed by Their Experiences of SaaS, Gartner.com, 2009-07-08. Retrieved 2009-09-16
15. Institute of Directors - Retrieved 8 April 2010
16. "SaaS 2.0: Saugatuck Study Shows Rapid SaaS Evolution to Business Platforms" (PDF). 2006. Retrieved 2006-09-01. {{cite web}}: Unknown parameter |month= ignored (help)
17. Who does that server really serve? Retrieved 2010-04-03.

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