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data in a central location, providing end users with access to the data and software, which is accessed across the World Wide Web
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This is a simple explanation of SaaS, but the same architecture can be applied to a broad variety of applications, used either by businesses or individual end users SaaS can be divided into two major categories: Line of business services These are business solutions offered to companies and enterprises They are sold via a subscription service Applications covered under this category include business processes, like supply-chain management applications, customer relations applications, and similar business-oriented tools Customer-oriented services These services are offered to the general public on a subscription basis More often than not, however, they are offered for free and supported by advertising Examples in this category include the aforementioned web mail services, online gaming, and consumer banking, among others
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There are definite advantages to your organization pursuing SaaS, for example: There s a faster time to value and improved productivity, when compared to the long implementation cycles and failure rate of enterprise software There are lower software licensing costs SaaS offerings feature the biggest cost savings over installed software by eliminating the need for enterprises to install and maintain hardware, pay labor costs, and maintain the applications SaaS can be used to avoid the custom development cycles to get applications to the organization quickly SaaS vendors typically have very meticulous security audits Many SaaS vendors have the capabilities to let customers comply with Sarbanes-Oxley Section 404, Generally Accepted Accounting Principles (GAAP), Financial Accounting Standards Board (FASB), US Securities and Exchange Commission (SEC), and American Institute of Certified Public Accountants (AICPA) regulations
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SaaS vendors allow companies to have the most current version of an application as possible This allows the organization to spend their development dollars on new innovation in their industry, rather than supporting old versions of applications
Software Considerations
Using the existing software paradigm, the user purchases a software package and license by paying a one-time fee The software then becomes the property of the user who bought it Support and updates are provided by the vendor under the terms of the license agreement This can be costly if you are installing a new application on hundreds or thousands of computers SaaS, on the other hand, has no licensing Rather than buying the application, you pay for it through the use of a subscription, and you only pay for what you use If you stop using the application, you stop paying
PART III
World Wide Web
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Cloud Vendor You only pay for the applications when you use them
Additionally, the software is not installed on the user s computer Think back to the Hotmail example earlier You access your Hotmail inbox via your web browser It may sound as if SaaS is only useful for small to medium-sized businesses Not so In 2005 Salesforcecom signed a deal with Merrill-Lynch for 25,000 subscriptions
Vendor Advantages
The advantages flow both ways Not only does the end user benefit, but so does the vendor (Of course, they re in the business to make money, so there is at least that benefit) And financial benefit is the top one vendors get a constant stream of income, often what is more than the traditional software licensing setup Additionally, through SaaS, vendors can fend off piracy concerns and unlicensed use of software Vendors also benefit more as more subscribers come online They have a huge investment in physical space, hardware, technology staff, and process development The more these resources are used to capacity, the more the provider can clear as margin
Limitations
While the preceding pages have presented a glass-half-full image of SaaS, naturally there are some downsides Happily, a lot of these hurdles can be easy to clear and are being overcome
Part III:
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