A few years ago, Application service providers (ASPs) were all the rage. Then the Internet bubble burst and the term fell from favor. Now more companies are offering their applications via Software as a Service (SaaS). Some articles you read do not even attempt to distinguish between the two, and refer to ASP/ SaaS companies.
So what is the difference, and why is distinguishing between them important.
SaaS is a delivery model rather than a specific market or type of company. SaaS is an activity that can be delivered in a number of ways. ASP describes a business model for providing a specific type of hosted services. Where an ASP provides web-based access to licensed software running on the ASP’s servers, SaaS describes a software-on-demand model similar to the time-sharing systems that many of us grew up using. The hosting and licensing fees are not distinguished. That is right, it is back to the future time as software business models now have come full circle and time-sharing is “in” again.
Why does it matter?
SaaS uses a utility pricing model rather than term licensing. Utility pricing offers benefits to both publishers and customers as customers pay for usage rather than access. This means new customers are not required to make a huge financial commitment up front while offering lots of upside to publishers from heavy users.
Thoughts to consider:
- Do your customers need a SaaS option?
- If you don’t offer SaaS, can another vendor displace you by using it?
- Would offering your application via SaaS allow you to access a new customer segment