Software as a Service, or SaaS, means different things to different people. For a business it means purchasing, an Internet based application service, from a third party vendor. A consumer views SaaS, as the ability to buy and download desktop software from the Internet, or to pay an annual fee to vendors like Symantec to keep virus definitions up to date via the Internet.

The two important characteristics of SaaS are:

• Network and web-based access to commercial software computing services where the processing is done on a third-party server, rather than at each customer’s location.
• A tenant-based pricing model for hardware, software, administration and consulting services.

SaaS involves the offloading of front-office and back-office business processing to a third-party. Salesforce.com is a good example of a successful SaaS provider. At first glance, SaaS appears to be a similar version of the application service provider (ASP) model that failed considerably after the dot-com era. The differences between the two models have determined their outcome. The first is that the ASP model concentrated on providing an organization with the ability to move certain application processing duties to a third-party managed server. ASPs were not necessarily concerned about providing shared services to multiple tenants. Also, most ASPs did not consist of the required amount of application and business domain knowledge regarding the applications they were running.

Another difference between the ASP and SaaS approaches is that most ASP-supported applications were immense client-server programs with simple HTML web interfaces. SaaS solutions today are designed specifically for the Web environment, which improves usability and manageability.

One reason why the SaaS model is finding more traction than the ASAP approach is because ASP vendors were ill prepared and rushed their offerings to market before performance, security, customization and integration issues were solved, and before many organizations were ready to adopt the ASP model. Users are better equipped to take advantage of SaaS with the majority of these issues being resolved. The decrease in technical provisions and increase in user awareness and cost savings is providing the momentum for companies to adopt a SaaS approach.