The fundamentals of SaaS

Over recent weeks, I’ve had a number of informal discussions with people who have seen “SaaS” mentioned but have no idea what it means or the philosophy behind it. Therefore, this post is designed to help provide an explanation. Excerpts from(Wikipedia)

Software as a Service (SaaS) is generally associated with business software and is typically thought of as a low-cost way for businesses to obtain the same benefits of commercially licensed, internally operated software without the complexity and high initial costs.

Consumer-oriented web-native software is generally known as Web 2.0 and not as SaaS.

Many small businesses have little interest in software deployment, but do have substantial computing needs. Application areas such as Customer Relations Management (CRM), Video Conferencing, Human Resources, Accounting and Email are just a few of the initial markets showing SaaS success.

Key Point – The distinction between SaaS and earlier applications delivered over the Internet is that SaaS solutions were developed specifically to leverage web technologies such as the browser, thereby making them web-native.

Key characteristics of SaaS software are:

– Network-based access to, and management of, commercially available (i.e., not custom) software

– Activities that are managed from central locations rather than at each customer’s site, enabling customers to access
applications remotely via the Web

– SaaS applications are generally priced 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.

Drivers for SaaS adoption

Everyone has a computer: 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, external applications is lower and less hand-holding by internal IT is needed.

Computing itself is 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.

Applications are standardised: With some notable, industry-specific exceptions, most people spend most of their time using standardised 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.

Web systems are reliable enough: 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.

Wide Area Network’s bandwidth has grown drastically following the 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.

Author: Jas

Jas Dhaliwal is a highly experienced International Social Media Strategist. Currently working as AVG Technologies, Director of Communities and Online Engagement, he specialises in building and engaging with social communities across the web. Born and bred in London, he is passionate about technology and social anthropology. Prior to AVG, Jas launched the social media program for Microsoft’s MVP Award program. Jas holds a BSc (Hons) in Information Systems and has an MBA from Brunel University in London, England. You can follow Jas as @Jas on Twitter or on Google+