GXS Insights

How do SaaS Environments Work?

The SaaS-based delivery model represents a significant change in how software companies are bringing their solutions to market. Traditionally, software vendors had a few routes for getting their software to market. Depending on the type of application, it could either be purchased on CD from a store, via a website or directly from the software vendors themselves. Either method of acquiring the software presented the customer with the challenge of having to install the software themselves. Purchasing the software effectively gave the user the “right to use” the software for as long as they wanted. If they required further updates such as security patches or other application enhancements then software vendors would normally charge a maintenance fee in addition to the cost of purchasing the software. The maintenance fee would include things such as access to security patches, application enhancements and access to some form of help desk to ensure that problems could be smoothly and quickly resolved.

The software industry has used this software delivery model for over 15 years now and it is only since the improvement and reliability of the Worldwide Web that software vendors have started to look at this as a serious medium for delivering software applications to their customers. About five years ago software vendors started to use the Internet to deliver software applications to end users. These Application Service Providers (ASPs) basically allowed their customers to download software applications and the installation process was similar to the traditional CD-based software. Even though the ASP service model provided a relatively efficient means of getting software applications to the customer, it suffered a number of problems. The main one being the size of the actual download file, which could run into hundreds of MB; and the subsequent maintenance updates which also had to be downloaded on a regular basis. Without these updates the software vendors could not always ensure that their customers were running the latest version of their software.

Deploying software within a large company, particularly one which has offices in many locations around the world, has been time consuming and resource intensive. The software would first have to be “qualified” to check that it could run on the computers within the organization and ensure that it is capable of running on the hardware. Once installed, the user would have to undergo some level of training before finally getting to use the software. To get around the shortfalls in the ASP, and for that matter the traditional software delivery models, a new method of delivering software was conceived.  This new service model, Software as a Service, which was built on the core building blocks of ASP, was architected from the ground up to operate as a fully “hosted” solution. The diagram below illustrates the key differences between the traditional software delivery model and a SaaS-based delivery model.

In essence, all users of SaaS-based applications run exactly the same code with customizations and configurations stored as metadata parameters. The key difference between SaaS and traditional software delivery is that SaaS-based applications are fully hosted within some form of data center environment. All updates to the SaaS application are carried out within the data center and therefore the user can always be assured that they are using the most recent version of the application. These applications are designed from the ground up to work and take advantage of operating within a web browser-based environment. Since nearly every PC comes supplied with a browser as part of the operating environment, there is hardly any implementation work required by a company’s IT department. This allows the IT department to focus on other activities reducing support costs, and allowing a certain level of autonomy within some of the company’s business units.

SaaS is traditionally sold on a subscription basis that includes upgrades, maintenance and some level of basic support. These subscriptions operate on a monthly, quarterly or yearly basis, and are ideal for companies who would be using the application sporadically. Along with the trouble free delivery method, the flexibility in payment terms is one of the most appealing benefits of SaaS. For once, CIOs and IT directors are able to cost IT projects more accurately and experience considerable savings when compared to using traditional licensed-based software. SaaS vendors typically deliver two to four major upgrades per year and several minor updates that the user gets automatically. Users of SaaS-based applications can always be certain that they are using the latest version of the software provided by the vendor. This is not the case with traditional software applications where the burden is on the user to ensure they have the latest software patches downloaded.

The adoption of SaaS by companies is in part driven by the end users, who benefit from access to any application, from anywhere, on virtually any web-enabled device. SaaS also provides better licensing, cost control and an assurance that employees are using the most recent version of the application available. Until recently SaaS has been used for single applications only, and due to its fully hosted nature, was difficult to integrate to other back-office systems on a company’s IT infrastructure. To get around this integration issue and provide companies with the flexibility to integrate the SaaS application to their back office, a new version of SaaS, version 2.0 was conceived. NOTE: SaaS 2.0 is discussed in more detail elsewhere within GXS Insights. In short it provides a means for a company to integrate their back-office systems to the hosted application that resides in an external data center. The customer is provided with a means to create and manage customizations to the SaaS 2.0 application by way of an API tool or XML programming.

SaaS has the potential to totally change the way in which companies run their IT infrastructures.  It allows relatively small companies to use feature-rich applications that are traditionally used by the larger organizations. The main barriers to these small companies have been the acquisition cost and the level of IT support required to run the applications efficiently. SaaS brings down these barriers and allows many more companies to streamline and simplify their IT infrastructures, improve application deployment in geographically dispersed locations, and realize significant cost savings.