Learn about SaaS

Software as a service (SaaS, typically pronounced [sæs]), sometimes referred to as “software on demand,” is software that is deployed over the internet and/or is deployed to run behind a firewall on a local area network or personal computer. With SaaS, a provider licenses an application to customers as a service on demand, through a subscription, in a “pay-as-you-go” model, or increasingly at no charge.

SaaS was initially widely deployed for sales force automation and Customer Relationship Management (CRM). Now, with MortgageDashboard, the benefits of SaaS are available for all Mortgage tasks, Loan Origination, Banking, Document Management, Appraisal Management, Marketing and much more.

Benefits

• Save money by not having to purchase servers or other software to support use.
• Faster Implementation. Customers can deploy SaaS services/products within hours rather than weeks or months.
• Focus Budgets on competitive advantage rather than infrastructure (Low Total Cost of Ownership)
• 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
• Reliability
• Faster new feature releases
• Embodiment of recognized best practices

History

Software as a service’s acronym “SaaS” was first used in an article called “Strategic Backgrounder: Software as a Service.” It was published in February 2001 by the Software & Information Industry’s (SIIA) eBusiness Division. The 18 page document is one of the most complete essays pertaining to SaaS available today. SIIA developed the backgrounder to analyze the current state of the SaaS market and its near term prospects, and to provide insight for its members who may be profoundly impacted by changes implied in the SaaS mode. Software as a service is essentially an extension of the idea of the Application Service Provider (ASP) model.

Philosophy

Software and business professionals generally associate the term SaaS with business software, and as a possibly lower-cost way for businesses to use software as needed rather than license all devices with all applications. With a well-designed implementation and properly priced licenses, on-demand SaaS provides license benefits without associated complexity and the potential high cost to equip devices with applications they may not need.

Some software fits the SaaS model. Many Unix applications already work this way, while 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. 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 by letting, for example, someone on a home computer remotely operate their machine at work to create a document in a word processor licensed on that machine. While promising, this requires leaving the host computer on and creates security issues. SaaS achieves efficiencies by enabling on-demand licensing and management of information and output, independent of hardware location.

Key characteristics

SaaS characteristics 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 a plugin to a platform as a service

(Service oriented architecture is naturally more complex than traditional models of software deployment.)

SaaS providers generally price applications on a per-user basis and/or per business 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.

Some SaaS applications are free to the user, with revenue being derived from alternate sources such as advertising, or upgrade fees for enhanced functionality (often referred to as “freemium”). Examples of free SaaS applications include large players such as Gmail and Google Docs, as well as smaller providers like Wave Accounting and Freshbooks.