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SaaS (Software as a Service) is also referred to as the Application Service Provider (ASP) model by the International Data Corporation (IDC), or it is sometimes called "'on-demand software"'; it enables entities to access a complete business software functionality on a cloud based application.

The Software & Information Industry Association (SIIA) defines SaaS as an "application or service deployed in a centralized data center across a network such as the Internet, Inranet, LAN or VPN".[1] Users may be able to access the SaaS through subscription or by renting it from a vendor or service provider.


Prior to the introduction of SaaS in the market, consumers physically purchased needed software, this meant that all software needs maintenance, support and upgrades were additional materials and costs for the consumer and the manufacturers as well.

In the late 1990s, Application Software Providers (ASPs) found a way to deliver software applications more efficiently and to reduce the costs of upgrades by introducing an alternative to software on premise, the SaaS model. However, the initial introduction of the SaaS model was faced with challenges given the number of users and that the deployment of client/server software is difficult and the maintenance, support and upgrade requirements were still expensive as delivery was still not possible via the Internet.[2]

Over the years, companies improved the SaaS model using modern applications, particularly Internet technology. Thus, multiple customers are able to use one application set and database. The cost of infrastructure and maintenance were lowered using multi-tenancy applications and consequently consumers paid less for their software application subscription fees.

Based on a study conducted by IDC on SaaS, the revenue for SaaS will increase five times faster compared to the revenue of traditional packaged software by 2014, to around $40.5 billion. According to IDC vice president of SaaS and Cloud Services, researcher Robert Mahowald, "The SaaS model is becoming mainstream and it is quickly dominating the planning from R&D, to sales quotas, to partnering, channels and distribution of all software and services vendors."[3]

Delivery Models for SaaS

SaaS is delivered in different ways, such as:[4]

  • Cloud Based SaaS Delivery Model- Vendors offer software service at a hosted ISV data center such as cloud computing platforms facilitated by regular subscription
  • Hybrid SaaS Delivery Model- Software applications are hosted by SaaS vendors on a multi-tenanted application wherein a separate database is located in every tenant company. This delivery model is normally used by companies with database security or compliance issues with government regulations
  • On-Premises SaaS Delivery Model-The software applications are often times delivered by vendors to its the customers personal servers or through the appliances provided by the vendors that run under a firewall
  • Platform as a Service (PaaS) based SaaS Delivery Model- software applications are delivered via web-based platforms

Benefits from SaaS Model

Users of SaaS enjoy the benefits of:[5] [6]

  • easier administration
  • automatic updates
  • patch management
  • software compatibility
  • easier collaboration
  • global accessibility
  • faster software modifications
  • cheaper and more affordable software services
  • improved competitive positions
  • access to the latest technology

SaaS Companies

Some of the popular SaaS companies include:[7]