What are the advantages of SaaS?

SaaS is changing the software development, delivery and usage space. It is deservingly substituting the pervious less efficient third party hosting model. SaaS offers advantages such as reduction in Total Cost of Ownership, higher accountability and others for enterprises.

Software as a Service (SaaS) is software which is delivered to an end user on demand as a service. The functionality of the software is delivered through internet using a subscription based or “pay as you go” model and in many cases even without charge. Popular example of SaaS services are Google Apps, Salesforce, SAP on demand services, etc. 
 In a nutshell, key features for SaaS are:

  1. SaaS hosting

    • Owned, operated and managed externally
  2. SaaS delivery

    • Through internet
  3. SaaS operations

    • Subscription based / pay-as-you-go models
    • Serves multiple customers
    • Regular upgrades
    • Monitoring and support by experts
  4. SaaS user control

    • Does not manage or control the underlying SaaS infrastructure such as network, servers, operating systems, storage, etc.

The popularity of SaaS has brought sea change in the software industry in the era where companies across the globe are trying to reduce their IT expenditures. Before SaaS, enterprises were using two models for their IT needs:

  1. Traditional model – Own-Own – Owning the software and owning the infrastructure required to host it
  2. Third Part hosting model – Own-Do not own- Owning the software but outsource hosting to a third party servers

The Own-Own model is still popular with many enterprises but the own-outsource model has gone obsolete mainly because of issues related to multiple accountability, costs (capital and operational), complex SLAs, etc. This has lead to SaaS model which is – Do not own-Do not own. Thus in some sense, Saas model can be called as the improved version or next generation of the Third party hosting model.
SaaS model has many advantages over the third party hosting model. Some of the key advantages of SaaS are listed below:

  1. Anytime and anywhere – Delivery through internet ensures that software applications are available anywhere and anytime
  2. Lower Total Cost of Ownership (TCO) – According to analysis, 70% of the IT budgets of enterprises go it maintain and run existing IT infrastructure. The SaaS model reduces both capital expenditure and operational costs by:

    • Eliminating requirement of hardware and s/w required at set-up time
    • Eliminating deployment costs (testing, integration, design, etc.)
    • Eliminating requirements of hardware and s/w maintenance and upgrades
    • Eliminating human resource requirement for monitoring and support of both associated hardware and s/w
  3. Higher accountability is achieved as a single vendor (and thus single SLA) provides the complete s/w package
  4. Protection from technology obsolescence as regular application upgrades is provided by SaaS companies. Possibility of easy switch to other vendor in case of significant technology shift is possible.
  5. Many of the indirect costs associated with IT infrastructure are eliminated in SaaS model
  6. Firms can concentrate on their core competencies rather than devoting time and resources in maintaining IT infrastructure and support systems, thus making them more agile
  7. Rapid scalability – Because of quick implementation, low initial investment and pay-as-you go payment facility the SaaS services can be scaled-up with ease and speed
  8. Apart from the above there are many more minor advantages of SaaS which are offering specific.

SaaS has and is expected to have a major impact in the way firms build, sell, buy, and use software. It is expected to be major driver for software products adaptation in SMBs and home businesses segment.