SaaS: Pros, cons and leading vendors

SaaS: Pros, cons and leading vendors

Summary: Software as a Service (SaaS) is an increasingly popular delivery model for a wide range of business applications. We outline the benefits and drawbacks of SaaS, present a listing of vendors and consider which kinds of companies will benefit most from outsourcing software provision to the cloud.


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 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.

SaaS application delivery involves a chain of technology links, any of which can introduce delays or outages that impair the user experience and reduce productivity (Image source: Compuware).

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.


Topics: Cloud: How to Do SaaS Right, Cloud


Charles has been in tech publishing since the late 1980s, starting with Reed's Practical Computing, then moving to Ziff-Davis to help launch the UK version of PC Magazine in 1992. ZDNet came looking for a Reviews Editor in 2000, and he's been here ever since.

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  • The power of SaaS

    yes indeed, amazing the number of things you can do with SaaS.

    If you have a need, there's probably a SaaS for it... or else it will be created soon.

    When it comes to collect onsite Data, conduct mobile studies/survey, get customer satisfaction or build email database, there's Datafield :
  • Interesting article

    Hi Charles,

    I really liked the analysis of the market and how it was developing. In the gold rush that is SaaS, sometimes it is hard to see the wood from the trees and getting some information on growths, players and segments is always good to get hold of. We look more at the accounting and business side and there are some very interesting non-US companies operating there - many from Scandinavia and one in particular from NZ.


    Centric Logic
  • Integration-as-a-Service - the new hot topic

    Charles - a fascinating article and brilliantly articulated! I'm particularly interested to follow the topic of Integration-as-a-Service. As companies dabble in the marketplace, many are “catching colds” with mainstream public cloud offerings due to their inability to integrate all their other applications. As you know, this is precisely where we specialise! We take the square peg, chisel away at it and fit it into the round hole! Keep me posted!
  • Great Article!

    Hi Charles, thanks for a thoughtful piece. SaaS offerings can deliver a whole host of benefits, but you rightly point out that potential customers must have a clear understanding of their business needs and ask the right questions before jumping in. Identity and access management services based in the cloud can be a net win with the right fit. I'd be interested to hear your thoughts on our approach at N8 Identity:
  • Great Article! No totally up-to-date nevertheless

    Hello Charles,

    Good job!

    1) Could you add for expense Management SAP Travel OnDemand which is a T&Expense Management Application 100% integrated out of the box with SAP FI and SAP HCM ?
    2) Could you also add SAP JAM which is an Enterprise collaboration application totally integrated with both the SAP On-Premise and On-demand applications allowing business to collaborate "in-context"
    3) Could you add finally SAP Business ByDesign for the Financial/Accounting/Revenue bit?

    Thanks !


  • Which apps are best? Read the reviews!

    This is a great summary of lots of vendors to check out. If folks want a place to read some reviews and find out which apps rank best in terms of customer satisfaction (think Yelp for B2B SaaS apps) check out or
  • Importance of Customer Success and Content Marketing to SaaS

    nice article. SaaS is an area which has grown exponentially in the last 1 year. so it will be interesting to see how these trends have changed.

    one thing i wanted to add is the importance of Customer Success within the SaaS model, and how customer success can further feed into the Content Marketing strategy. check this article to know more ....

    Anupam Bonanthaya
  • Cloud Computing

    It’s easily understandable that when a company hires a third-party service provider to handle its data and business process, one of the many concerns is security. Other problems that may arise over time are access management, increased dependence and higher charges.
  • Great Article

    Thank you for a great article. I see that SaaS Solutions is the future for businesses. provides FREE cloud integrated SaaS solutions in one platform to help entrepreneurs, home-based, small- to medium-sized businesses be more efficient and competitive.