What is a SaaS Model?

The software as a service (SaaS) model is a way of providing the same software to different customers via a network, usually the Internet. In other words, the software is not hosted on the customers' individual computers. Under the SaaS model, a vendor is responsible for the creation, updating, and maintenance of software. Customers buy a subscription to access it, which includes a separate license, or seat, for each person that will use the software.

The Saas model can add efficiency and cost savings for the both the vendor and customer. Customers save time and money since they do not have to install and maintain programs. The customers do not have to hire staff, or use existing staff to maintain the software. They also generally do not have to buy any new hardware. This allows a customer to focus more resources on growing the business.

Shifting the burden of software hosting and development to the vendor can also speed up the time it takes for the customer to see a return on the software investment. Using the SaaS model, the number of seats can be increased as the business grows. This is usually faster and cheaper than purchasing another license and adding to another computer, as with traditional software.

Vendors usually only have to update and maintain the software on the network, versus updating different copies of the software on different computers. This allows the vendor to provide the latest updates and technology to each customer in a timely manner. The drawback for the customer is that they do not control the software, and customization of programs may be limited.

If an update is requested by a customer, it will most likely need to benefit other customers who are also using the same software. If the customer completely outgrows the software, however, the company can simply discontinue its subscription at the end of the current contract. In such a cancellation, applications typically do not have to be removed from the customer's computers. Generally, the canceling customer maintains ownership of any proprietary data entered into the SaaS application.

SaaS model contracts may be terminated early with sufficient cause. The vendor not delivering the software in a timely manner — or not at all — or the software not working as specified in the contract, are all typically grounds for termination of the contract. With broadband technology more commonplace throughout the workforce, however, customers have many choices when it comes to software delivered under the SaaS model. Customers can research SaaS vendors thoroughly, and request current references, to help avoid any non-delivery issues.