Software as a service, or SaaS is a means of deploying software as a service on demand. Which means, an application service provider (ASP) leases out the software to a subscriber to be used on a need basis, and is charged only for the usage.

SaaS implementation by Salesforce.com

For most companies, software is an integral part of their operations, and investment in software procurement, licensing and human resources leaves a dent in their operating expenses. These costs are more pronounced in the case of SMEs (small and medium enterprises).

SaaS as a concept has been around for a while now, but its prominence has grown in recent times, and for a good reason. In times of economic slowdown, and cost rationlisation, SaaS as a model makes good business sense. Businesses should focus on growing their business and it isn’t prudent to spend time, money and resources on setting up a software infrastructure in your premises, when that isn’t core to the business.

Indeed, companies are waking up this reality.

According to some estimates, almost 50 percent of software purchased by SMEs will be SaaS. A recent Gartner study predicts that SaaS will enjoy a CAGR of 22.1 percent through 2011 for the aggregate enterprise software markets – more than double the rate for total enterprise software.

Presently, CRM (Customer Relationship Management) solutions occupy a greater piece of the overall SaaS applications pie, followed by content, communication and collobration.  Of the SaaS vendors worlwide, Salesforce.com has made the maximum impact, and has revenue in excess of a billion $. Microsoft and Oracle have also forayed in, albeit a bit late.

Amongst the Indian players, Impel is another promising company with its flagship CRM solution, ImpelCRM. However, SaaS works on the premise of an ubiquitous, uninterrupted broadband connection – which is a bit of a challenge here in India. Hopefully this won’t be an issue of contention for long.

There is no doubt though that the future belongs to SaaS, and for companies contemplating on adopting it, the time is now.