Last week I began writing about a new perspective on Software as a Service. SaaS is a new way of looking at the customer/software provider relationship as one of continuous service and extension of the value that the provider can offer to the customer. SaaS requires a provider break the old software model of “sell a version and leave” – hoping that the customer continues to use the software and renew their support agreement. SaaS is a transformation that requires that the software provider view the customer as a partner. The solutions that are being delivered must add continuous value and grow and extend that value through time – much like Fed Ex is a service provides or a Cell company provides services to its customers. It is less about the “phone” or the “box” and more about the value of the overall service (including the phone and the box but extending to much more).

The second characteristic of SaaS is Hosting and Deployment. On demand, which I discussed last week, implies the SaaS provide must have a fully hosted option available. The SaaS provider must have expertise and robustness in its hosting solutions to provide the level of service required of the customers being serviced. For business applications, the minimum is a fully secure data center, scalable infrastructure, proven expertise in hosting (ask how many customers and user on the hosted solution!), data backup polices, off site backups, service level agreements for up time, 24x7 data center support, and limited planned downtime. As SaaS becomes more mission critical, you will see the bar rise on the requirements of the hosting provider and only those providers with the expertise and financial strength will be able to meet the increased demand for hosting capabilities.

A hosted solution offers customer several key benefits. It eliminates the need to invest in infrastructure. It offers rapid (1-2 days) deployment of a solution. Hosting also reduces the implementation cycle substantially for more rapid time to value. For many organizations, hosting might also solve the challenges of IT procurements as well as firewall issues for distributed team access such as consultants, partners, and customers.  

There are several other benefits that are equally if not more important than time, hassle, and cost saving. One of these is that the expert sin the services are managing the solution. This means that you benefit from the providers experience on a daily basis with managing the infrastructure requirements and changes and updates to the software service are simplified – you just log on the next day and have new capabilities.

While many might are espousing that SaaS means only hosted delivery, this not consistent with the service delivery approach that is truly SaaS. SaaS is more about the entire philosophy of how you drive value to the customer. It implies and requires hosting as an option (which arguable drives the greatest value) but SaaS further requires that the provider look at the customers needs and deliver the service solution that best meets their requirements. Who hosts the application should not be the key driver. If you have architected the solution to be On Demand and web based, a customer can also “host” the solution and still receive many of the same benefits of the overall service. In this case, the service is just different – adjusted for the needs of the customer. Instead of hosting, you provide regular updates to the software the client applies. The SaaS provider continues to extend other services around the total solution. In the next article, I will talk about this extension of services and value as it applies to SaaS in greater detail.