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.

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.  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. 


Anita Campbell Anita Campbell is the Founder, CEO and Publisher of Small Business Trends and has been following trends in small businesses since 2003. She is the owner of BizSugar, a social media site for small businesses.

11 Reactions
  1. And the nth Advantage is Piracy.

    Software as a Service ends piracy full stop. With no application content to redistribute to another PC and the subscription model enforcing user adherence to EULAs you dont have to implement wild and crazy anti Piracy measures ever again.

    It caught my Eye in my reader today so thanks for the post.


  2. This is clearly the future in software development and it has numerous advantages. I’d like to use this chance, and let you all know we’ve launched a free web based service for small businesses called Paymo. It’s a web based time tracking tool that offers powerfull features. give it a try.

  3. Thanks, Nicholas, for pointing out the piracy issue. Businesses can get into trouble if they use pirated software. The anti-piracy folks have been targeting smaller businesses recently.

    Management sometimes is aware of piracy. But sometimes they don’t even know it. Rogue employees could be misusing software. Or the company simply could have poor controls in place and not keep good records.

    If you’re caught, piracy could be very expensive, not to mention damaging your business reputation. And don’t even think you won’t get caught — all it takes is a disgruntled former employee to report your company, and voila you’re in big trouble.


  4. I blogged about the same thing here:

    But from the point of an ISV.

    I am of the opinion that high-performance applications do need to have the installable option. I do with I was cool enough to come up with an idea for a service that could make me some $$$ online though!

  5. ** I do wish **, not “I do with” 😀

  6. Sohail, you are right about some apps, where there’s need for high performance for now it’s best to use a desktop app. However, in the future new tech will make web apps much faster. I have no doubt that in the next 10years a lot of the desktop computers will be dumb terminals that connect to the internet for everything.

  7. Jan, if you ask Sun, that happened 10 years ago! But I admit, the timing of the technology is right this time around.

  8. I do have to agree, that some applications run the best on the desktop. Microsoft creates some great software, office beeing one of them (although i hate the latest version, one of the reasons that i’m using Open Office now).
    Many people thing that google is working on an OS that will change the game. I guess we’ll just have to wait and sze what happens.

  9. This is the way I have been constructing my web sites for 3-4 years. The real issue with tis model, and new software in general, is getting the word out – marketing. You can have the best software on the best servers and most bandwidth but all will be for naught if no one knows about it.

  10. When advising small business computer consultants on which services to offer as part of their solutions, I typically tell them to steer clear of promoting any “products” they sell above the solutions they offer. Consultants should definitely be stressing the benefits of their services over products to prevent themselves from being seen as a “commodity” or attracting those choosing computer services providers based on price. However, offering software services can become an important part of a strong business because, as mentioned, it can definitely help with piracy issues with your clients (which you should make clear are unacceptable from the beginning) and help you become a one-stop shop for technology solutions.

  11. As a solution provider (who survived the dot-com halcyon days as an application service provider for SAP, now a software-as-a-service provider of our own product), we are committed to the tools and techniques. The obstacles I’ve seen in the Small- to Medium-size enterprise space revolve around some standard questions:

    – Do I own my data? (yes, backup/export whenever you want)
    – Will you be around in 5 years? (yes, we are profitable and growing. Ten years in the biz proves we know what we’re doing)
    – Is my data secure? (yes, in most cases more than you could do for yourself. Our government clients have high demands that benefit our commercial clients)

    So SAAS is here to stay. The issue of what apps will move from desktop to web-based is an interesting one. Think about running Photoshop as a web app — seems highly unlikely right now, but renting HD movies over the internet did too only a few short years ago.