Software as a Service?
Software as a Service is an interesting concept. It implies that, instead of purchasing the software, you are purchasing it as a service – which really means the right to use the software.
You are also (usually) purchasing a hosting and infrastructure service along with the rights to use the software. SaaS providers maintain the hardware, perform upgrades, backup your data (sometimes), and otherwise perform all of the “keep the lights on” services and activities required to keep the software running.
Imagine a typical, 1990s style software purchase:
- You buy a source code control system.
- You set up a server and install the software.
- You pay ongoing support costs: providing power to the server, keeping the server cool, applying security and operating system updates to the server.
- You pay costs associated with administering the hardware and labor costs to update and upgrade the software.
- You carry risks – a botched upgrade or a hardware failure – which can cause downtime or lost data.
- You bear the costs of designing and maintaining a secure system. Do you allow your people to access the software (on the server) from other computers on your network? Do you allow them to access the software when they are not on the network (travelling, working from home, etc.)? How do you prevent your competitors from stealing or, even worse, destroying your data?
Now imagine that you’re outsourcing all of the “keep the lights on” activities above:
- You pay an IT services firm to manage the hardware and the software for you, including the security model.
- And you just use the software. That’s one of the benefits of purchasing SaaS. To really grasp the economics of SaaS you have to contrast it with the economics of software license purchases.
