Software as a Service (SaaS)

Background

SaaS is a technological invention dating back to the 1990s that initially went unnoticed due to the rapid adoption of web services that was taking place during that time. Software applications during this period mainly operated in isolation on a single machine. Internet connections had very low bandwidths in the 1990s, which severely limited the adoption of software delivery over the Internet. The subscription approach to software delivery was later employed to provide software services to multiple systems without requiring the users to purchase and maintain locally installed applications. Even though SaaS implementations were becoming more prevalent in the late 90s, it was still impractical due to old prevailing web technologies and limits in data communication technologies. Furthermore, major software vendors like Microsoft and Oracle did not view SaaS as a reliable alternative for mission critical services. Thus, SaaS found its use in practical small-medium markets, where it was employed as a solution to software problems of limited scope. When larger vendors like Salesforce and Netsuite began to show interest in the subscription model of SaaS, its popularity began to improve significantly. Businesses quickly learned that SaaS afforded them the liberty to access entire system services or subscribe to only the essential ones. Other reasons why SaaS started to be widely adopted include:

• 1.

  Higher internet bandwidth and restructuring of data networks

• 2.

  Internet speeds increased exponentially, thus reducing SaaS latency

• 3.

  Internet became more affordable

• 4.

  Businesses possessed significantly higher bandwidths

Furthermore, as people became more comfortable with conducting just about everything online, the SaaS model became more familiar. Initially software vendors found it hard to accept the subscription model commonly employed by SaaS vendors. However, as the number of internet subscribers exploded in the early millennium, vendors began to realize the untapped potential of recurring revenue with relatively low overhead offered by the subscription based SaaS model (Menken, 2008; 2010).