Software as a Service (SaaS, typically pronounced 'sass') is a model of software deployment whereby a provider licenses an application to customers for use as a service on demand. SaaS software vendors may host the application on their own web servers or download the application to the consumer device, disabling it after use or after the on-demand contract expires. The on-demand function may be handled internally to share licenses within a firm or by a third-party application service provider (ASP) sharing licenses between firms..
On-demand licensing and use alleviates the customer's burden of equipping a device with every conceivable application. It also reduces traditional End User License Agreement (EULA) software maintenance, ongoing operation patches, and patch support complexity in an organization. On-demand licensing enables software to become a variable expense, rather than a fixed cost at the time of purchase. It also enables licensing only the amount of software needed versus traditional licenses per device. SaaS also enables the buyer to share licenses across their organization and between organizations, to reduce the cost of acquiring EULAs for every device in their firm.
Using SaaS can also conceivably reduce the up-front expense of software purchases, through less costly, on-demand pricing from hosting service providers. SaaS lets software vendors control and limit use, prohibits copies and distribution, and facilitates the control of all derivative versions of their software. SaaS centralized control often allows the vendor or supplier to establish an ongoing revenue stream with multiple businesses and users without pre-loading software in each device in an organization.
The sharing of end-user licenses and on-demand use may also reduce investment in server hardware or the shift of server use to SaaS suppliers of applications file services.
As a term, SaaS is generally associated by software professionals and business associates with business software and is typically thought of as a low-cost way for businesses to obtain rights to use software as needed versus licensing all devices with all applications. The on demand licensing enables the benefits of commercially licensed use without the associated complexity and potential high initial cost of equipping every device with the applications that are only used when needed.
Virtually all software fits the SaaS model well. Many Unix applications already have this functionality whereas EULA applications never had this flexibility before SaaS. A licensed copy of a word processor, for example, had to reside on the machine to create a document. The equipped program has no intrinsic value loaded on a computer that is turned off for the night. Worse yet, the same employee may need another fully paid license to write or edit a report at home on their own computer, while the work license is inoperable. Remote administration software attempts to resolve this issue through sharing CPU controls instead of licensing on demand. While promising, it requires leaving the licensed host computer on and it creates security issues from the remote accessing to run an application. SaaS achieves efficiencies by enabling the on demand licensing and management of the information and output, independent of the hardware location. maintenance
Providers of SaaS generally price applications on a per-user basis, sometimes with a relatively small minimum number of users and often with additional fees for extra bandwidth and storage. SaaS revenue streams to the vendor are therefore lower initially than traditional software license fees, but are also recurring, and therefore viewed as more predictable, much like maintenance fees for licensed software.