The ASP SAAS Business Model Explained

There are lots of acronyms today that are stirring the IT industry. Asp saas soa and what have you.  To avoid confusion however, it should be noted that all of these refer to software services. It is a business model where a service provider offers the use of a specific computer program to consumers using the Internet as the standard delivery vehicle.  In simpler terms it means a provider rents the software to the consumer.  The end user on the other hand pays a certain subscription fee to the service provider.

The more popular term for this business model though is SaaS or software as a service.  Actually public utilities like electricity, air travel, and telephone services can be compared to SaaS.  Consumers pay the services provided by an electric company or buy a ticket to get the services of an airline company.  The reason is common sense because it would be very impractical and expensive for a consumer to buy an airplane and maintain it just to fly back home or go to a business trip.

The analogy is perfect for software services.  A company will have to build their own IT environment, maintain the server, hire technicians and experts, buy expensive software, install it on main frames, deploy it on a LAN, etc. These would be very expensive, time consuming, and sure sources of big headaches.  Software service providers offer to solve this by using their own servers to deploy the computer program to the consumer.  It virtually rents out the software and the user only needs a PC and an Internet connection.

Saas business model is a win-win solution for the service providers and end users.  The customer cut their IT costs while their subscription to the service increases the income of software service providers.