The Benefits of the Software-as-a-Service Model
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When the Internet burst upon the scene in the early 1990s, the concept of software as a service (SaaS) seemed an idea whose time had come. It got hyped along with everything else about the Internet and reached a massive peak of inflated expectations in early 2000, as venture capitalists funded dozens of nearly identical companies that provided various SaaS solutions.
As venture funding dried up in mid-2000, the SaaS model began to fracture. The business plans assumed zero customer attrition, an uncompetitive landscape and IPO's in the absence of revenue. Most venture capitalists initially bought in to these fictions but disillusionment set in and 99 percent of those companies are no longer around. However, the strong did survive, and now, due to the success of companies like Salesforce.com, Journyx and Rightnow.com, SaaS is back. According to Gartner Inc, by 2010, 30 percent of new software will be delivered via the SaaS model.1 Variously (and incorrectly) termed on-demand software, the ASP model, or hosted software, SaaS is where you rent Web-based software hosted at the provider's site. For many companies large and small, SaaS is the best way to roll out new technology. SAAS has now proven itself and is here to stay. What do all these terms mean? * SaaS: a multitenant architecture where the software is provided to you remotely by another company. * ASP: a vendor puts whatever programs you want up on a server at his site. Customers can co-exist on one machine. * Hosted: a vague term that could mean ASP or SaaS * On-Demand: Software that may or may not be remotely hosted and multitenant but is rented instead of bought. The staying power of SaaS as opposed to the other models has arisen for several reasons: 1. Low cost of entry. Instead of paying lots of money to roll out a complex solution across the entire company, customers can just roll out one test department of 20 people. The risk is very low if it fails, and they don't have to involve their busy IT staff. The cost stays low due to the economic superiority of the multitenant model. 2. Onus is on the vendor. If the vendor's software is broken, they won't be getting money from any customer for long. The company is motivated to fix the problem. 3. The vendor works for the buyer. Customers don't have to rely on their IT department to install an application. Everything is running securely at the vendor's location. 4. Less risky investment. Instead of spending $60,000 all at once, for example, customers pay for the software monthly - the monetary risk is lower and less scary. 5. Vendors must provide a secure data environment, or they're out of a job. Most vendors understand that data must be backed up religiously, and security is the top priority. Customer's IT departments are typically pulled in many directions and can't be as focused on one solution. Customers can rest assured their data security is probably better with a hosted solution, not worse. |