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Software as a Service: Expect to See More of It

Software as a service — known by the acronym SaaS and sometimes called Web-based software or software on demand — is one of the prevailing trends in small business technology. 

One obvious advantage of on-demand software is that you don’t have to install anything on your computer.  You just go on the Web, sign up for an account, and you’re good to go.  It’s superb for small businesses without an IT department.  You don’t have to worry about installing, upgrading, maintaining — that’s all handled for you.

Another advantage is cost.  Typically you can spread out the cost in smaller monthly payments.  You do not have to pay a big chunk of money up front to buy a software license.

A third advantage is immediate availability.  Generally you can sign up and start using the software in minutes, even at 5 AM if you want — it’s instant gratification.

A fourth advantage is access from anywhere.  You can be traveling in another country and get access to the software to conduct business, without having to worry about connecting  to your network.  Also, team members who work remotely can log in and use it no matter where they are.

If you stop to think of it, I’ll bet you use at least a half dozen software services.  And if you’re like me and spend a lot of time online, it’s more like dozens of services if you count social networking applications such as LinkedIn, financial calculators, GMail and the like.

With such popularity, it comes as no surprise that the software-as-a-service category is growing at a 43 per cent average annual compound growth rate [1].

Minda Zetlin wrote an article recently identifying software on demand as a key technology trend creating opportunities for small businesses.  Read:  Hot Technologies to Watch in 2008.

UPDATE December 16, 2007:  Today’s New York Times has a big article about Google versus Microsoft centered around Web-based applications [2].  It quotes Eric Schmidt, CEO of Google, stating that small businesses would be “crazy” to buy packaged software.  I do not agree with that statement.  While online software applications are great and I am a big proponent of them, sometimes there is no real substitute available online — case in point, Microsoft Office.  True, I use GMail, but only for limited purposes.  The foundation of my business still runs on Outlook and other Office programs such as Excel and PowerPoint and Word.