What is Software as a Service (SaaS)?

If you have cable television service you are already familiar with software as a service though you may not know it. Every time you purchase a pay-per-view program, you are using a SaaS option. Instead of buying tickets to an event or purchasing a movie to keep in your home, you are purchasing the right to view the program during a set time. Now translate that knowledge to the computer industry and you have a foundation for understanding what SaaS means.

Instead of buying a software program outright, installing it, and maintaining it a company can opt to rent time on a server that has the software installed. This saves storage space, personnel resources, and financial resources.

Few companies are large enough to have a dedicated IT staff or to maintain their own servers. Renting time on a server to access software makes sense for small to midsize companies. This is a truly cost effective measure not to mention ecologically friendly measure.

When you buy a software program, you get a box, packaging protection, and plastic covers that all have to be disposed of. Then you have to dispose of the program you are replacing as well as the outdated manuals. An employee has to take time away from their other duties to first uninstall the old program and then install the new one. In effect, you have just thrown away the money you spent on the first program and the payroll for the employee to complete a redundant task. If you have a private garbage collection company, you have just wasted room in your dumpster. Consider completing this process with a dozen or more programs a year.

Renting time on a server to access the programs you used to buy and install gives the server company the headaches of upgrades, maintenance, and organization. They purchase the program and the rights to allow a set number of users to access it. They buy the upgrades and install them. They deal with the trash. You pay the rent.

This is especially beneficial if you want to change programs. Look at it this way, your company currently uses a moderate level accounting program. Fortunately, your company has grown; unfortunately, the changes your growth caused overwhelms your current accounting program. Now you have a choice. You can shop around for a new accounting program and purchase the one that best fits your needs or you can locate an online software as a service (SaaS) provider and compare the cost of renting only the accounting modules you need against buying the entire program.

This is not a no-brainer. In fact, business managers will need to compare not only the fixed monetary costs vs. the variable monetary costs but also many other factors such as security vs. accessibility and ease of use. However, for many small to midsize companies it may turn out to be the ideal solution.