Software as a Service 101

Cloud computing has moved from the high-level fringes to the mainstream in the last few years, and one of the main reasons has been the increasing popularity of “software as a service.”

Software as a service (SaaS) is web-based software which allows the user to access an application or database from any computer with an Internet connection, as opposed to traditional software, which has to be installed on a local computer. SaaS has been in use for more than ten years and has become a major segment of the software market, especially in business applications.

The first major SaaS provider was, which was founded in 1999 and provided an online sales management system. Dozens of new applications were developed in the early 2000’s, but the era of SaaS truly began in 2006, when Amazon launched its EC2 platform and Google introduced Google Apps.  Since then, growth in the segment has been tremendous-- the IT research firm Gartner Inc. estimates that SaaS, which represented 5% of business software revenue in 2005, will account for 25% of the market by 2011.

Why is SaaS growing so rapidly? Because it’s easy to implement, it requires no up-front capital investment, and it is well suited to a business environment in which workers often use multiple computers and mobile devices to do their jobs.

The key difference between SaaS and traditional software is that the software license is associated with a specific individual, rather than a specific computer. This means that a licensed user can access the application from any computer with an Internet connection, rather than being tied to one computer or having to buy multiple licenses.

Since SaaS applications reside on the software provider’s servers, SaaS consumes essentially no IT resources on the client side. Software maintenance, upgrades, and often even training are handled by the provider. This also greatly speeds up implementation—a SaaS program can be rolled out to a large group of users almost overnight, while traditional implementations might take months, significantly reducing the software’s usefulness to its purchaser.