First, let's define SaaS - also known as "cloud" software, SaaS stands for Software as a Service. It's a great definition that is often forgotten - especially the part about "service". What it means, is that the software (program) is offered to customers as a service, rather than a product. In the past people were quite reluctant to use a software that was hosted "in the cloud" and not manually installed on their computer or server. However as technology improves and the world wide web becomes the shopping mall of tomorrow, user confidence has increased and it has become an accepted delivery method.
There are several benefits to this phenomenon:
1. High Adoption. SaaS applications are available from any computer or any device - any time, anywhere. Because most people are familiar with using the Internet to find what they need, SaaS apps tend to have high adoption rates, with a lower learning curve.
2. Lower Initial Costs. SaaS applications are subscription based. No license fees mean lower initial costs. There is no need to install expensive software, and then pay every year or two to have it updated. It's also less hassle. Having the SaaS provider manage the IT infrastructure means lower IT costs for hardware, software, and the people needed to manage it all.
3. Painless Upgrades. Because the SaaS provider manages all updates and upgrades, there are no patches for customers to download or install. There is also no wait time - new features and enhancements are delivered as soon as they're ready, so no more waiting for next year's version, or putting off an upgrade due to lack of resources. The SaaS provider also manages availability, so there’s no need for customers to add hardware, software, or bandwidth as the user base grows.
4. Seamless Integration. SaaS vendors with true multitenant architectures can scale indefinitely to meet customer demand. Many SaaS providers also offer customization capabilities to meet specific needs. Plus, many provide APIs that let you integrate with existing ERP systems, development software, and other business productivity systems.
5. Popularity with IT. A recent survey of a thousand IT professionals by Forrester Research found that they are turning to hosted (SaaS) products as a way to offload management of non-mission-critical applications such as HR and CRM. Plus, the subscription-based SaaS pricing model can keep IT budget costs consistent or lower than packaged or homegrown software.