Software As a Service (SaaS) Software on Demand

Software as a Service (SaaS) Today’s business world demands that business owners quickly adapt to a changing environment. Businesses can improve internal operations by adapting to emerging technology trends to reduce operational costs and ultimately improve client service. Companies that fail to adapt find that attempting to function using old, supposedly tried-and-true methods and technologies can cost them significant money.

When deployed correctly, Software as a Service (SaaS) can help your business reduce overhead costs associated with managing Software installed and maintained on servers and client workstations. Software as a Service, or “software on demand,” provides quick deployment for many corporations and works particularly well within certain business operating models. Evolution of Software as a Service (SaaS)

SaaS began with the development of hosted software space that first appeared commercially in 1998. These first-generation SaaS applications allowed Web-based access to Software through a subscription from the SaaS vendor instead of traditional application licensing for Software purchased “off-the-shelf.”


The licensing model encourages software vendors to restrict their applications by objectively defining how and when the Software can be used. The EULAs (End-User License Agreements) describe how an application can be used.

With SaaS, conventional CD software installation onto a workstation is completely eliminated, and customers are granted full access to the application from their desktop PC. The PC becomes a “thin client” when using SaaS; virtually all access functions are executed on the vendor’s server in a remote data center. The desktop PC becomes a client, and the vendor serves up the application(s) on demand; hence, SaaS is Software on the market.


At first, only certain companies were eager to adapt to SaaS. However, this group of companies made waves in their respective industries by becoming operationally effective when using SaaS. Today, Software is more often than not developed using the SaaS model because this delivery mechanism is a good fit for certain business operating models.

SaaS is rapidly becoming a preferred delivery vehicle for corporations around the world. In certain instances, business owners are pleased with the total-cost-of-ownership savings of the SaaS solution compared to buying Software through conventional reseller channels. With the only financial responsibility in a recurring subscription fee, SaaS costs are constant and predictable. As many business owners know, this is not the case with perpetually licensed out-of-the-box software. By the third year of ownership of licensed Software, the total cost of ownership increases because many vendors are pushing for new hardware equipment and other upgrades to your IT infrastructure.

Software as a Service (SaaS), Defined as SaaS, is just what the term implies: Software is supplied as a service by the software vendor. Users run the SaaS application over the Internet. The application resides off-site at the vendor’s data center, where the vendor is responsible for maintaining the data, servers, and all other related hardware. Access to the remotely located application is granted by a subscription that allows end-users to utilize the Software.

Vendors can maintain an application that works for multiple clients without considerable customization or integration issues. With traditional enterprise-level applications, this is not the case where many costs are generated customizing an application for a particular company. Those costs are eliminated with SaaS, and the vendor has a single, easy-to-maintain application for multiple clients. Upgrades are a snap, as is releasing new versions. When the vendor needs to upgrade its application or release a new version, it simply installs it in their data center. All customers are instantly upgraded simultaneously the next time the application is accessed.

In most cases, the Software must be configured in an environment where customers can access multiple applications simultaneously. SaaS is also known as a “one size fits all” solution. By maintaining the hardware, vendors assume much of the operational IT costs associated with maintaining the Software and servers that run the application(s). Transitioning to SaaS at your company could save your organization a lot of money by shifting these operational costs to the SaaS vendor. Doing so eliminates the number of IT hours necessary to maintain the Software running in-house on workstations, plus it reduces hardware costs for additional servers and other related equipment.

Shifting these responsibilities to the software vendor changes the customer-vendor relationship. Firms that use SaaS can dramatically reduce operational costs and enable IT staff to focus on higher-order organizational tasks. The SaaS platform also differs radically from traditional licensing methods in how the Software is paid for. Gone are the large upfront costs, consultancy fees, and maintenance costs associated with adopting a new application company-wide. Instead, customers pay a subscription fee that may occur monthly or annually.

SaaS software vendors make the trade-off for the upfront fees for a predictable, steady cash flow from a service-based relationship with the customer. Keeping the customer relationship intact is essential for the SaaS provider to maintain these revenue streams and keep them flowing. This need drives the SaaS vendor to provide quality service in their application and quality customer service when needed.

Often, it is the latter quality that many traditionally licensed software platforms are lacking. Regrettably, with certain SaaS vendors, some companies are all about the customer upfront when the application is initially being deployed, only to essentially “forget” about the customer when it is time to provide additional support. Forgetting about the customer is not in the SaaS vendor’s best interest.

It should also be noted that certain enterprise software vendors often claim disinterest in developing SaaS applications, claiming SaaS cannot provide the same level of sophistication inherent in their offerings. These vendors are underestimating the pervasiveness and agility of today’s SaaS offerings. Considering that enterprise software vendors generate significant revenues from upfront costs, the reasoning behind the expressed dissatisfaction becomes even clearer.

An enterprise software vendor may not be viable for small business owners. For some vendors, it’s not cost-effective for large enterprise-centric SaaS vendors to support businesses with fewer than ten end users. With the SaaS application offering, the level of customer service remains the same no matter how many users need access.

The benefits of SaaS Savings generated by relocating an application from the customer’s location to the vendor’s data center are easily observable regarding reduced IT staff hours or employees and the associated hardware needs. Other savings and benefits generated by SaaS are not so easily visible, are subtle, and can be far-reaching in their effectiveness.

These benefits are worth mentioning: the Delivery of standardized software applications across departments, business units, and the entire corporation. Improved security and online access to digital documents in-house and outside the office. Comprehensive training supplied from the same SaaS vendors with a new subscription. Ongoing customer support from the SaaS vendor continued throughout the contract term. o Reduced risk as opposed to retail-boxed licensed Software. The Software is always accessible, and you don’t sacrifice productivity time should a workstation have to be rebuilt and reinstall the Software.

Anytime a business can embrace an improved operational process, cost savings are realized. Standards applied across the business environment reduce or remove variations in work performance. These variations occur when employees, perhaps located at different work sites or even departments within the same building, alter their work process when completing similar tasks. Defining standards helps your business succeed in the most cost-effective manner possible. Under certain operating models, SaaS improves these standards by requiring virtually all employees to access the same version of the Software. The centralized application provides an access medium for employees to run the Software at the office or remotely.

Access to files at the vendor’s data center (or, in some cases, a local workstation) is enhanced through SaaS. Centralized access using high-speed Internet connections improves the likelihood that documents will be easy to find. Security can also be enhanced by locating the documents off-site. Situated in the vendor’s data center, your business documents are now maintained within the vendor’s security standards. Quality SaaS vendors usually have very high levels of security. Often, they use encryption to protect documents as the documents pass to and from the data center back to the user.

Note: Review the SaaS vendor’s security policy before signing any contract.

Another potential benefit of using SaaS is the training supplied by the vendor when a subscription is purchased. Reputable vendors provide training – after all, it is in their best interest to train customers to keep that constant revenue stream flowing. Customers will use the Software if they know how to use it and can get what they need from the application(s).

SaaS training can be tailored to your company’s specific needs. Extensive guides are informative and easy to understand, and interactive help is readily available. Free trial periods are also common with SaaS vendors. During the free trial period, which usually lasts a few weeks or even a month or more, some vendors will take the time to train you on the Software to acquire you as a client. In a service-based relationship established by the SaaS subscription, customer support continues as long as the subscription remains current. This is also essential for the vendor to continue the relationship. Remember, a SaaS vendor wants to keep you happy, and they know that quality customer service goes a long way to retain clients.

SaaS presents far fewer risks for customers than many traditional licensing models. SaaS vendors reduce the software transaction with the customer down to granting access with a subscription payment. For the customer, should the application not perform as expected, the loss is only limited to the subscription price. This is not the case with certain traditional software licensing models, where the total cost of the Software is a loss should the application not live up to expectations. Also present within a SaaS licensing model: You’re encouraged to consider purchasing more licenses than you need initially or else risk violating the defined EULA. The SaaS vendor isn’t concerned with disk copying or reverse engineering of their product. All code is kept on-site safely and can’t be shared unless granted access.

SaaS service agreement terms are cut and dried and should be displayed on the vendor’s website. These terms should be read and thoroughly understood. The vendor can easily terminate the customer relationship if a violation occurs by simply refusing access to the application. Before any company adopts SaaS, it is important to note what specific types of organizations are structured to benefit the most from SaaS. The fact is that particular kinds of companies should not adopt SaaS. The best companies suited for SaaS are ones that have a unified operating model.

If your business is considering moving to SaaS from conventional Software, you must ask yourself these five questions: How will SaaS support our business better than traditional software licensing? o What is the total-cost-of-ownership comparison between a three-year SaaS subscription with bundled services and purchasing Software the conventional way? Are there any special considerations for the SaaS software that would require modifications to your current systems or network infrastructure? How would your end users’ experience with the SaaS model change compared to conventional Software? o What time frame is needed to introduce the SaaS application compared to conventional Software?

The Unified Business Operating Model I’ve firsthand experience that the unified operating model is usually the best fit for SaaS. For businesses in this category, leveraging SaaS can significantly reduce deployment and maintenance costs. Not all companies operate under this business model. The unified operating model has that other types of operation don’t because many applications are accessed through a centralized location. Businesses lacking this centralization may find it difficult to convert to SaaS. Centralized management is also important to the unified operating model, as are standardized business units. Companies with heterogeneous business units with localized management and different business processes would also have some obstacles to overcome when transitioning to SaaS.


Alcohol scholar. Bacon fan. Internetaholic. Beer geek. Thinker. Coffee advocate. Reader. Have a strong interest in consulting about teddy bears in Nigeria. Spent 2001-2004 promoting glue in Pensacola, FL. My current pet project is testing the market for salsa in Las Vegas, NV. In 2008 I was getting to know birdhouses worldwide. Spent 2002-2008 buying and selling easy-bake-ovens in Bethesda, MD. Spent 2002-2009 marketing country music in the financial sector.