|On-demand software, otherwise known as Software as a service (“Saas”), is a software delivery model where a software vendor develops a web-native software application and hosts and operates the application for use by its customers over the Internet. The customer does not own the application, with can be accessed by multiple customers simultaneously, but generally pays for using it.|
SaaS contrasts with the traditional enterprise software model, which requires each customer to install, configure, manage and maintain the hardware, software and network services to implement the software application in-house. Moreover, traditional enterprise software vendors and their customers must incur the ongoing expenses associated with maintaining support for numerous legacy versions of their software and assuring its compatibility with a wide array of hardware devices and operating environments. The SaaS delivery model gives business access to state-of-the-art software applications at a low risk, avoiding the high upfront costs and complexities of traditional enterprise software implementations.
There are not a large number of pure-play public SaaS vendors. Salesforce.com, Inc. (CRM) is the poster child for the industry. Other public companies include RightNow Technologies, Inc. (RNOW), Salary.com, Inc. (SLRY) and Taleo Corporation (TLEO). Two other companies, NetSuite, Inc. and Constant Contact, Inc., filed registration statements last week. NetSuite, which is controlled by Larry Ellison, will be a high profile IPO.
SaaS is a hot niche for venture capital. Hardly a week goes by without an announcement that another SaaS company has received funding.
Wikipedia has a good piece on SaaS: