As SaaS was being explained to me I began thinking of similar nomenclature such as network delivered services, subscription based services, on-demand software, web-hosted services, utility computing and the grand daddy of them all, ASP (Application Service Provider). From what I was hearing there was no real difference between ASP and SaaS...or was there?

In 1999 I completed an ASP strategy for the .com company I was working at in California. I was ready to ride the ASP wave to an IPO (Initial Public Offering) and the ASP business model was simple; we would take our existing client-server application, place it on robust infrastructure, connect it to a big pipe (bandwidth), quickly develop HTML front-ends and Bob's your uncle. Suffice to say we never went public and the ASP model never really took off.

At Microsoft a very similar preoccupation was happening with the ASP model around the Office product suite. A third-party provider e.g. telecommunication/hosting company would purchase a version of software and offer this to customers for a monthly fee. Telco companies were accustomed to monthly recurring revenue streams whereas software companies were looking for more predictability and smoother revenue curves. Both software vendors and telecommunication companies believed the ASP model had merit. However one major flaw was that the application (software) and managed hosted environments (telco) were treated separately. A managed service provider could provide SLAs (Service Level Agreements) around network availability but couldn't guarantee the reliability of the code in the application.

However with SaaS there is no division between application licensing and hosting fees. SaaS – software on demand - is built from scratch as an application that is hosted and designed to be used in an environment where you pay monthly subscription fees for the right to access the application.

SaaS has fundamentally transformed the traditional application, architecture and delivery model. For starters true SaaS is designed to be highly scalable with an open and extensible interface – mainly through the use of web services. This architectural approach with regard to scale and enabling multi-tenancy data is approached uniquely. It contrasts with the monolithic ASP model that provided limited scalable and integrating flexibility. Most ASP based software was originally designed to be sold in a box as software to a client and deployed on-premise.

SaaS applications were never intended to be sold in the traditional client-server environment. Salesforce.com is the global leader in the CRM SaaS space and from inception has only ever designed and architected its solution to be accessible by the net. These ‘net-native' applications are updated monthly, weekly and in some cases daily giving clients the ability to always be on the latest version without any upgrade pain as compared to the traditional three-year software upgrade cycles. SaaS eliminates some of the pain between business and IT and will allow business requirements to be delivered more rapidly.

Graham returns in August to discuss the business benefits of SaaS, the alignment of business - IT and how business is embracing SaaS.