Thomas Otter, a Enterprise Irregular software blogger who works for SAP, says he can't figure out what SaaS is.
His main complaint is "What is or isn't 'allowed' to be called SaaS seems so arbitrary" - does SaaS have to include multi-tenant, hosted, subscription-based, web 2.0-enabled, etc.?
SaaS isn't some vague concept that's hard to define - it's just that many definitions miss the point by focusing on the delivery method or infrastructure or software architecture or pricing, when the definition should be based on customer value.
SaaS is defined by the business benefits it delivers to customers - faster time-to-value, lower cost of ownership, and increasing value over time through ongoing free upgrades. Secondary business benefits include better support (since all customers are on one version of the software and the SaaS provider knows the user's data, configuration, and usage), easier deployment (since SaaS providers are paid based on usage, they are motivated to make the software easy to use and adopt), and lower hidden costs (no upgrade projects, patches to apply, databases to back up and restore, etc.)
All the key components of SaaS architecture and infrastructure - multi-tenant, single-version, shared infrastructure, fully webified, configurable, metered and actively monitored - simply serve to deliver these benefits.
Software offerings that don't deliver these benefits aren't SaaS - and there are many examples out there, especially on-premise software offerings that are hosted and pretend to be SaaS, called "Same old Software, as a Service" by Phil Wainewright. On-premise-only software vendors try to muddy the waters by adding hosting and subscription pricing rather than modifying their software to deliver faster time-to-value, lower cost of ownership, and ongoing free upgrades.
In fact, even well-meaning observers miss the point, as Nicholas Carr did in his comments on Thomas Otter's post. Nicholas brought forth Glovia as a SaaS example - a company with 1,000 on-premise customers but no SaaS customers, who just released a simpler version for SMBs hosted by Deutsche Telekom's T-Systems unit. This isn't SaaS, it's on-premise software trying to become SaaS by issuing press releases and renting a cage at a data center rather than re-architecting the software to deliver more value, as pointed out by Phil Wainewright who takes Nicholas to task.
Another counter-example to SaaS is the first-generation ASPs that emerged in the late 90's trying to host on-premise software. Thomas says ASPs were the same as SaaS, but I don't know why we have to keep explaining the difference over and over and over again. Here it is, once more with feeling: ASPs died because they offered no business benefits over on-premise installed software. They simply hosted on-premise software in an offsite data center as a single-instance installation, which didn't reduce the time-to-value, didn't reduce any cost of ownership (it required the same per-customer infrastructure and operational costs), and didn't offer any increasing value over time - upgrades were just as costly and painful and infrequent as for on-premise installations.
Thomas ends his post on a positive note, however, comparing SaaS to the old service bureaus, specifically ADP. Let's see, does ADP's software-enabled payrolling service offer fast time-to-value, low cost of ownership, and ongoing free upgrades? Yes - so that makes it SaaS, in my view. Payrolling is a back-office process so full web-enablement and end-user self-service don't matter as much, but the business benefits are compellingly SaaS-like.
And I can assure you that ADP's software is multi-tenant, shared-infrastructure, single-version, and frequently and automatically upgraded for free.
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