Software as a Service (SaaS), the best-known branch of cloud computing, is a delivery model in which applications are hosted and managed in a service provider's datacenter, paid for on a subscription basis and accessed via a browser over an internet connection. As a mainstream business option it's often seen as dating from the launch, in 2000, of the hosted Salesforce.com customer relationship management (CRM) service, which has become the 'poster-child' for SaaS. However, its roots lie in earlier developments in virtualisation, service-oriented architecture (SOA) and utility/grid computing.
As a term, 'Software as a Service' has been in common usage for nearly a decade, with its cloud-stack companions Platform as a Service (PaaS) and Infrastructure as a Service (IaaS) gaining currency more recently. (PaaS refers to the on-demand delivery of tools and services that allow SaaS applications to be coded and deployed, while IaaS covers the on-demand delivery of virtualised servers, storage, networking and operating systems):
Infrastructure hosted in a third-party service provider's datacenter is called 'public cloud' infrastructure, while similar technology hosted within an enterprise's network is called 'private cloud' infrastructure. So-called 'hybrid clouds' mix the two approaches, with certain workloads or business processes remaining in-house and others — perhaps less mission-critical — being outsourced to public cloud services. Public cloud services can also be brought into play on a temporary basis, to cope with peaks in demand that would otherwise overwhelm a business's private cloud infrastructure.
Before SaaS, you generally rented software via an 'Application Service Provider' or ASP:
The key differences are code ownership and tenancy. ASPs generally hosted multiple instances of third-party client-server applications, whereas SaaS providers tend to develop their own applications and operate a true 'multi-tenant' model: subscribers access the same code base, with their data and any customisations kept separate.
Pros and cons of SaaS
For businesses, there are many potential benefits to be had from adopting the SaaS model. These include:
Cost savings Moving from the capital-heavy expense of installing, maintaining and upgrading on-premises IT infrastructure to the operational cost of a SaaS subscription is a tempting business proposition — particularly in the short-to-medium term. It's important to be aware of potential hidden costs in SaaS adoption though.
Scalability As your business grows and you need to add more users, rather than investing in additional in-house server capacity and software licences you can adjust your monthly SaaS subscription as required.
Accessibility A browser and an internet connection is all that's usually required to access a SaaS application, which can therefore be made available on a wide range of desktop and mobile devices.
Upgradeability Your cloud service provider deals with hardware and software updates, removing a significant workload from your in-house IT department (whose extra human bandwidth can, in theory, be released for different tasks, such as integration with existing on-premise applications).
Resilience Because the IT infrastructure, and your data, resides in the cloud service provider's datacenter, if some form of disaster should strike your business premises, you can get back up and running relatively easily from any location with internet-connected computers.
Of course, there are also potential pitfalls associated with SaaS, which is why the world hasn't yet gone completely cloud-software-crazy. These include:
Security The number-one concern for businesses considering SaaS is often security: if sensitive company data and business processes are to be entrusted to a third-party service provider, then issues such as identity and access management — particularly from mobile devices — need to be addressed. And if your company uses multiple cloud services, be aware that deprovisioning an ex-employee can become a security headache.
Outages Despite cloud providers' best-laid plans, outages do happen, with causes ranging from acts of God to human error and many points in between. Any downtime is irritating, but a lengthy outage of a mission-critical app could prove disastrous. You'll need to scrutinise your service provider's SLA (Service Level Agreement) and historical performance very carefully before outsourcing mission-critical applications to the public cloud. Tools such as Compuware's Outage Analyzer and Is It Down Right Now? let you monitor ongoing cloud outages.
Compliance When your business data resides in a service provider's datacenter, ensuring that you comply with the relevant government data-protection regulations can be a problem. You'll need to determine which regulations apply to your business, ask the right questions of your SaaS vendor and implement a solution to address any failings. Alternatively, you can investigate a Compliance-as-a-Service product such as that from Niu Solutions.
Performance A browser-based application hosted in a remote datacenter and accessed via an internet connection is likely to cause worries about performance when compared to software running on a local machine or over the company LAN. Obviously some tasks will be better suited than others to the SaaS model — at least until internet connection speed is no longer an issue. In the meantime, application performance management tools can help businesses and service providers keep tabs on how their apps are running.
Data mobility The SaaS market is awash with startups, and some will inevitably fail. What happens to your data and your carefully orchestrated business processes if your service provider goes under — or if you need to change your SaaS vendor for some other reason? When choosing a SaaS vendor, you'd be wise to ensure you avoid lock-in by preparing an exit strategy.
Integration Businesses that adopt multiple SaaS applications, or wish to connect hosted software with existing on-premise apps, face the problem of software integration. If it's not possible to handle the relevant APIs and data structures in-house, there's a relatively new breed of Integration-as-a-Service products available, including Boomi (a Dell-owned company), CloudSwitch and Informatica.
How big is the SaaS market?
In March last year, Gartner forecast that worldwide SaaS revenue would reach $14.5 billion in 2012 — a 17.9 percent increase over 2011's $12.5bn. This healthy growth rate is set to continue, according to the research company, which predicts a $22.1bn SaaS market in 2015.
Regional SaaS revenue forecasts for 2012 were headed by North America with $9.1bn, followed by Western Europe with $3.2bn. Other regions failed to break the $1bn barrier: Asia/Pacific ($934.1 million), Japan ($495.2m), Latin America ($419.7m) and Eastern Europe ($169.4m).
Gartner's research also highlighted regional differences in the most prevalent software categories deployed via the SaaS model: expense management, financials, email and office suites, and web conferencing in North America; financials and accounting, ERP, office suites, email and CRM in Asia/Pacific; CRM and groupware in Japan; email, accounting, sales force automation and customer service, and expense management in Latin America.
Next we'll look at some of the vendors in these and other business software categories.