Software as a Service (SaaS) – also called ASP (application service provider) or cloud computing – has become so commonplace in today’s business model that we rarely give thought anymore to the underlying management of activity such as email, online banking, payroll and benefits management and even customer relationship management. SaaS has proven itself to be a reliable and secure outsourcing option for many companies that want to reduce on-site infrastructure costs, while at the same time, have ubiquitous access to information over the Internet. The number of businesses turning to hosted solutions has been steadily rising, with CRM SaaS leaders like Salesforce.com reaching $1B in revenue and posting more than a 30 percent growth in the last quarter, at a time when financial turmoil was causing most other companies’ revenue to shrink.

The escalating adoption of SaaS as a business model

What makes the business model so appealing is that it frees companies from the complexities and high cost of managing sophisticated hardware and software so they can focus on their core strengths – leveraging business intelligence and managing business processes. In a traditional on-site implementation, the IT department oversees every permutation in the application stack: the user interface, the business application, the web/application server, the database, the operating system and all the associated hardware. In a SaaS implementation, the vendor takes full responsibility for system-wide upgrades and maintenance as well as all the storage technology. By shifting the burden to SaaS vendors who are better equipped to run the applications, companies can cut capital and staff expenditures, lower maintain costs and increase system uptime because availability is contractually guaranteed. For small to mid-size business or small remote offices that lack the internal core competency to manage such complex systems, SaaS gives them a way to reap the same benefits from the latest advances as their larger counterparts.