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The Rise and Rise of SaaS

Cloud Computing

Cloud computing is very much in vogue, as more and more businesses make use of cloud technologies. A major benefit of cloud computing is the cost savings it can deliver, along with the fact that cloud services can be easy to implement and are often scalable.

An element of cloud computing which has gained traction in recent years is that of Software as a Service (SaaS). At its most basic level, SaaS is the provision of software hosted on the cloud, usually charged on a subscription basis (rather than as a one-off license fee). A major benefit of this for businesses is the fact that they only need to pay for what they use, so if their software requirements increase or indeed fall over time, they can adjust their subscription accordingly.

Although Software as a Service has existed in various forms for many years now (Salesforce.com, often cited as one of the first SaaS providers, was founded in 1999), it has only really entered the mainstream in the last few years. And its rise looks set to continue, with Gartner predicting that the global SaaS market could be worth over $22 billion by 2015, almost double what it was in 2011 ($12.3 billion). Evidence of the widespread use of SaaS is provided by North Bridge Venture Partners’ annual Future of Cloud Computing Survey which shows that 63% of the organisations surveyed use SaaS.

The increasing trend of SaaS has also led to some major software companies adopting new business models. Microsoft and Adobe, for example, now offer their products on a subscription basis despite the fact that their traditional business models were based around selling perpetual software licenses. Microsoft’s Office Web Apps gives access to the Office suite for a monthly fee while Adobe’s Creative Cloud similarly offers software including Photoshop on a monthly subscription basis. This gives both home and business users access to software which they may not have previously been able to afford.

Software as a Service, therefore, is likely to become even more proliferate in the future than it currently is. It provides an extremely attractive proposition for start-ups and SMEs, who may not be able to afford the sometimes high initial outlays associated with purchasing software on a perpetual license basis. Large companies, too, can benefit from the lower implementation and upgrade costs often associated with SaaS. And companies can easily adjust their usage based on the needs of their business at the time, reducing the risk associated with purchasing new software. Of course, some businesses may still prefer the perpetual-license model when they buy software, so this is unlikely to disappear in the near future. But it will undoubtedly become a secondary offering from software companies, with SaaS leading the way.

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