Many small and midsize businesses (SMBs) don't yet fully understand what software as a service (SAAS) is, how SAAS works and why SAAS makes business sense for them. In this article, I'll discuss the evolution of software delivery models, why applications in the cloud make sense for SMBs, and the various benefits of SAAS for SMBs (including low financial risk, easy deployment and ease of access from anywhere). After reading this article, you'll be able to assess whether or not cloud-based, SAAS applications are right for your SMB.
Traditional software delivery models
In the traditional software delivery model, you purchase software up-front under a perpetual use license agreement. You'll also typically pay an annual maintenance fee to cover bug fixes and minor enhancements. The software is deployed in the company's data center. This model is still employed by large enterprise application vendors, making these applications inaccessible to the SMB because of their cost and the scope of the implementation.
With the widespread adoption of the Internet, software vendors began to look at a different approach to delivering software solutions. You could license software from the vendor and then purchase additional services from an application service provider (ASP) to host it. You didn't need to make infrastructure investments, yet still had your own (single-tenant) version of the application. However, hosting fees, up-front license costs and ongoing support contracts still contributed to a high TCO for this model.