Software as a service (SaaS; pronounced /sæs/) is a software licensing and delivery model in which software is licensed on a subscription basis and is centrally hosted. It is sometimes referred to as “on-demand software”, and was formerly referred to as “software plus services” by Microsoft. SaaS is typically accessed by users using a thin client via a web browser. SaaS has become a common delivery model for many business applications, including office and messaging software, payroll processing software, DBMS software, management software, CAD software, development software, gamification, virtualization, accounting, collaboration, customer relationship management (CRM), management information systems (MIS), enterprise resource planning (ERP), invoicing, human resource management (HRM), talent acquisition, content management (CM), and service desk management. SaaS has been incorporated into the strategy of nearly all leading enterprise software companies.
According to a Gartner Group estimate, SaaS sales in 2010 reached $10 billion and were projected to increase to $12.1 billion in 2011, up 20.7% from 2010. Gartner Group estimates that SaaS revenue will be more than double its 2010 numbers by 2015 and reach a projected $21.3 billion. Customer relationship management (CRM) continues to be the largest market for SaaS. SaaS revenue within the CRM market was forecast to reach $3.8 billion in 2011, up from $3.2 billion in 2010.
The term “software as a service” (SaaS) is considered to be part of the nomenclature of cloud computing, along with infrastructure as a service (IaaS), platform as a service (PaaS), desktop as a service (DaaS), managed software as a service (MSaaS), mobile backend as a service (MbaaS), and information technology management as a service (ITMaaS).
Centralized hosting of business applications dates back to the 1960s. Starting in that decade, IBM and other mainframe providers conducted a service bureau business, often referred to as time-sharing or utility computing. Such services included offering computing power and database storage to banks and other large organizations from their worldwide data centers.
The expansion of the Internet during the 1990s brought about a new class of centralized computing, called Application Service Providers (ASP). ASPs provided businesses with the service of hosting and managing specialized business applications, with the goal of reducing costs through central administration and through the solution provider’s specialization in a particular business application. Two of the world’s pioneers and largest ASPs were USI, which was headquartered in the Washington, DC area, and Futurelink Corporation, headquartered in Irvine, California.
Software as a Service essentially extends the idea of the ASP model. The term Software as a Service (SaaS), however, is commonly used in more specific settings:
While most initial ASPs focused on managing and hosting third-party independent software vendors’ software, as of 2012 SaaS vendors typically develop and manage their own software. Whereas many initial ASPs offered more traditional client-server applications, which require installation of software on users’ personal computers, SaaS solutions of today rely predominantly on the Web and only require a web browser to use.
Whereas the software architecture used by most initial ASPs mandated maintaining a separate instance of the application for each business, as of 2012 SaaS solutions normally utilize a multitenant architecture, in which the application serves multiple businesses and users, and partitions its data accordingly. The acronym allegedly first appeared in an article called “Strategic Backgrounder: Software As A Service,” internally published in February 2001 by the Software & Information Industry Association’s (SIIA) eBusiness Division.
DbaaS (Database as a Service) has emerged as a sub-variety of SaaS.