Software as a service is a software distribution model in which applications are hosted by a vendor or service provider and made available to customers over a network, typically the Internet.
Shortly, in the SaaS model software is deployed as a hosted service and accessed over the Internet, as opposed to “On Premise.”
The traditional model of software distribution, in which software is purchased for and installed on personal computers, is sometimes referred to as software as a product .
Comparison of business model
Traditional packaged software
Software as a serivce
Architect solutions to be run by an individual company in a dedicated instantiation of the software
Designed to run thousands of different customers on a single code
Designed for customers to install, manage and maintain.
Designed from the outset up for delivery as Internet-based services
Traditional Computing Model v. Cloud Computing Model
Software as a service (Saas) Traditional Software On-Demand Utility Build Your Own Plug In, Subscribe Pay-per-Use
Value for SaaS
SaaS Characteristics and Benefits OpSource -- Treb Ryan
Relative Cost of the Choices Capital Expense Operational Expense Components Traditional Saas Hardware & Software License Place People
Properties of SaaS Technologies
Will have to be priced based on usage
Will need to be able to leverage multiple SaaS offerings
Open Standards Based Technologies
Uptime will be key
– Disaster Recovery
The complete list of myths on SaaS
Customer loses control
Security is a problem
Difficult to integrate
SaaS is Risky
Hosted is only good for small businesses and projects
Costs more over time
Service could be poor with a SaaS
SaaS companies have an unproven business model
SaaS companies are competitive with the IT organization
Key Architectural Considerations
Scale the application
Scaling the application means maximizing concurrency and using application resources more efficiently – optimizing locking duration, statelessness, sharing pooled resources such as threads and network connections, caching reference data and partitioning large databases are examples of best practices for scaling applications to a large number of users.
Scale up and scale out
Enable multi-tenant data
The single-tenant data models of many existing on-premise applications constrain running application instance to only use operation and business data owned by a single organization. In a multi-tenant SaaS environment, this application instance and data ownership binding must be relaxed. For example, when a user from Acme is accessing customer information using a CRM application service, the application must be able to retrieve the customer data for Acme and not for any other companies. In order to enable multi-tenancy, the underlying application data model must be designed to accommodate flexibility for manipulating tenant specific data.
Sharing resources (One instance to run them all)
Many SaaS customers will want to customize the application services they subscribe to. Altering workflows, extending business documents, modifying business rules and customizing brands, logos and user interfaces are all within the plausible realms of application customizations. The challenge for the SaaS architect is to ensure that the task of customizing applications is simple and easy for the customers, yet at the same time, not incur extra manual development or operation costs for each customization. Expect meta-data to play a big part in SaaS solutions.
Customization through configuration
SaaS Maturity Levels ASP Minimum starting point
In the traditional model of software delivery, the customer acquires a perpetual license and assumes responsibility for managing the software.
There is a high upfront cost associated with the purchase of the license, as well as the burden of implementation and ongoing maintenance.
ROI is often delayed considerably, and, due to the rapid pace of technological change, expensive software solutions can quickly become obsolete.
Revenue Options For SaaS Firms
Subscription (monthly fee per seat)
Transaction based pricing (like credit cards)
Ad-based revenue (e.g. pay per click)
Lower Cost of Ownership
The software is paid when it is consumed, no large upfront cost for a software license Salesforce.com has a best-of-breed CRM system for $59.00 per user per month, with no upfront
Since no hardware infrastructure, installation, maintenance, and administration, budgeting is easy
The software is available immediately upon purchasing
Focus on Core Competency
The IT saving on capital and effort allows the customer to remain focused on their core competency and utilize resources in more strategic areas.
Users can use their applications and access their data anywhere they have an Internet connection and a computing device
This enhances the customer experience of the software and makes it easier for users to get work done fast
Freedom to Choose (or Better Software)
The pay-as-you-go (PAYG) nature of SaaS enables users to select applications they wish to use and to stop using those that no longer meet their needs. Ultimately, this freedom leads to better software applications becaus vendors must be receptive to customer needs and wants.
New Application Types
Since the barrier to use the software for the first time is low, it is now feasible to develop applications that may have an occasional use model. This would be impossible in the perpetual license model. If a high upfront cost were required the number of participants would be much smaller.
Faster Product Cycles
Product releases are much more frequent, but contain fewer new features than the typical releases in the perpetual license model because the developer know the environment the software needs to run
This new process gets bug fixes out faster and allows users to digest new features in smaller bites, which ultimately makes the users more productive than they were under the previous model.
Additionally, it is not necessary for the customer to continually upgrade the software. Each time the user accesses the software, it is the “latest and greatest” version that’s available.
Increased Total Available Market –
Lower upfront costs and reduced infrastructure capital translate into a much larger available market for the software vendor, because users that previously could not afford the software license or lacked the skill to support the necessary infrastructure are potential customers.
A related benefit is that the decision maker for the purchase of a SaaS application will be at a department level rather than the enterprise level that is typical for the perpetual license model. This results in shorter sales cycles.
Enhanced Competitive Differentiation
The ability to deliver applications via the SaaS model enhances a software company’s competitive differentiation. It also creates opportunities for new companies to compete effectively with larger vendors. The tangible value that customers can realize from the SaaS model versus the perpetual license model is a compelling selling point.
On the other hand, software companies will face ever-increasing pressure from their competitors to move to the SaaS model.
Those who lag behind will find it difficult to catch up as the software industry continues to rapidly evolve.
Lower Development Costs & Quicker Time-to-Market –
The main saving is at testing (35%).
Small and frequent releases – less to test
Application is developed to be deployed on a specific hardware infrastructure, far less number of possible environment – less to test.
This, in turn, provides the software developer with overall lower development costs and quicker time-to-market.
Effective Low Cost Marketing
Between 1995 and today, buyers’ habits shifted from an outbound world driven by field sales and print advertising to an inbound world driven by Internet search. The SaaS delivery model is perfect for marketing programs that exploit this shift.
Improved Customer Relationships
SaaS contributes to improved relationships between vendors and customers. In the traditional model once the software is sold, it is largely up to the customer to make it work. The SaaS model creates a more symbiotic relationship between vendors and customers and provides vendors with greater opportunities to please their customers
Protecting of IP
Difficult to obtain illegal copies
Price is low, making getting an illegal copies totally unnecessary
Applicability of Saas
Enterprise Software Application
Perform business functions
Organize internal and external information
Share data among internal and external users
The most standard type of software applicable to Saas model
Serve as the foundation for most other enterprise software application
Inapplicable to Saas model
Installation locally is required
Form the basis to run other application
Example: Window XP, Oracle database
Understand your business objectives and definition of a successful outcome (idea)
Select and staff your services delivery team (people)
Define and understand the infrastructure needed to deliver your SaaS application (hardware)
Select your hosting facility and Internet Service Providers (ISPs)
Procure the infrastructure and software required to deliver your SaaS application (security your platform)
Ready to Run
Deploy your SaaS delivery infrastructure
Implement disaster recovery and business continuity planning
Integrate a monitoring solution
Establish a Network Operations Center (NOC), Client Call Center and ticketing system
Design and manage Service Level Agreements
Document and manage the solution while open your business
Why SaaS will be successful
The IT industry is notorious for promoting new technologies with limited real-world value in search of a market. At the same time, there have been many worthwhile innovations that have failed to win widespread industry acceptance because they couldn’t be easily adopted.
SaaS isn’t just another IT fad that will fade away because it doesn’t fulfill its promise. Instead, there are a growing number of enterprises of all sizes that are generating measurable cost savings and performance improvements as a result of adopting SaaS.
This track record of success is accelerating the rate of adoption and expanding the range of applications that are being converted to the SaaS delivery model. It is also dramatically changing the competitive landscape of viable SaaS providers.
Relative startups, such as Salesforce.com, RightNow, and others, are now viewed by customers as equal or even superior to the far more established and historically more powerful major ISVs, system vendors, and outsourcers.
Why SaaS will make it
First, the shift to SaaS 2.0 is being driven increasingly by the acceptance of SaaS as a viable software delivery model. Saugatuck survey indicate that, as of Q1 2006
12% of U.S.-based companies are using SaaS applications
13% designing, prototyping or implementing their first SaaS application
14% percent are planning to do so later in 2006 or in 2007.
SECOND, due to the highly decentralized and fragmented procurement model of SaaS (often sold to business rather than IT buyers), Saugatuck found that most executives substantially underestimate current SaaS deployment and usage, suggesting that the penetration rates noted above might be very conservative .
SaaS Market S O F T W A R E 2 0 0 6 I N D U S T R Y R E P O R T - SAND HILL GROUP
Two major business models are vying for an growing share of software spend: Software as a Service and Open Source.
Although the market size for SaaS was relatively small ~$6 billion in 2005, it is poised to grow more than 20 percent annually.
SaaS has already gained traction in number of application areas and should make gains across a much broader cross-section of applications over the next 3 years.
Out of 34 application areas we have examined, only nine are unlikely to see some SaaS adoption over through 2008
SaaS adoption by segment – Enterprise
Change In IT Spending
CUSTOMER ADOPTION OF SaaS GROWING FAST
Why Going SaaS
A Look Ahead
The numbers show that SaaS is a far more attractive economic model than the perpetual license model.
Over the next 3 to 5 years, the sharp distinction between SaaS and traditional software models will blur. Traditional vendors will introduce and expand their SaaS offerings.
SAP recently announced their On-demand CRM and Marketing solutions.
Oracle inherited the on-demand business of Siebel.
The enterprise software market will see more offerings from these and other vendors based on SaaS.
What will distinguish the winners from the losers will not be the model itself but how the model is executed.
Open new markets, revenue streams, and distribution channels
Provide a stable, recurring revenue model
Afford consolidation of development and support efforts around single versions of code
Integrate into existing enterprise applications, architectures, and databases.
Supporting complex business processes and cross-enterprise tasks is beyond current products.
Protecting their proprietary data
How is the data protected from unauthorized access?
How is the customer assured access to the data?
How much effort is necessary to migrate data back to the enterprise or to another SaaS provider?
Future of SaaS
Media and Content as a Service: MCaaS
Media distribution as a service
Any digital content
SaaS as a Service: SaaSaaS, SaaS2
VARs sell and manage SaaS packages
More importantly – SaaS 2.0
College of Law Resolves Email Security Issue with Webroot® E-Mail Security SaaS
Guildford-based College of Law is a leading supplier of legal education and training in the UK, with affiliations and endorsements from many of the country’s leading legal firms. The College offers numerous courses and publications,as well as free legal advice to members of the public.
The IT team had installed GWAVA, an anti-spam and anti-virus solution for GroupWise systems, to protect its network of 2,500 PCs. However, the solution was not performing well, and vast amounts of spam continued to inundate its computers.
The levels of unwanted mail were extraordinarily high partly because many of the people behind those 2,500 computer screens were students and lot of them use Hotmail, Yahoo! and other online email systems which are open to harvesting,”
Working in conjunction with Altman, the college’s regular IT supplier, Galt settled on a managed email service: Webroot® E-Mail Security Software-as-a-Service (SaaS).
The service supports pre-defined and custom dictionaries of regular expressions and keywords to aid in detecting and controlling messages with sensitive or inappropriate content. Administrators can also create custom rules by combining subsets or supersets of dictionaries.
Webroot ‘hosts’ emails, which means that email is directed to Webroot’s own servers rather than those of the College or an Internet Service Provider.
Webroot filters the messages there, which provides enhanced security,increased bandwidth and more customisable settings. A Web-based administrative panel and summary dashboard offer total visibility, control and flexibility.
It potentially filters a small amount of legitimate emails as well as the unwanted.
Overnight drop in the volume of junk mail, and that led to an immediate freeing up of our network bandwidth
95 percent of our incoming mail from the Internet was identified as spam and blocked.Previously, these emails would have been accepted and filtered on the College’s servers, requiring additional manual filtering where there were grey areas.