Saas is formally classified as an IT service which permits companies that pay monthly fees for the API access to get various applications through the Internet. When Saas (or software as a service) is used, venture capital fund managers tend to favor investing into Saas companies. This may explain why, although 2007 was not a good year for investments into IT companies as a whole, top Saas companies might still be feeling optimistic that they have a better future this 2008 due to interest from venture capital funds.
Software vendors might be able to get more consistent revenues while reducing their research and development costs if they tap into the potential of Saas (rather than stay dependent on packaged software products.)
It is perceived that complicated enterprise software applications might not be as lucrative as the Saas application for any companies that are aiming for renewed growth in the IT industry, especially if these vendors are aiming their enterprise software application at Fortune 500 firms.
One good Saas business model that investors might want to investigate is made up of Saas applications that work for clients who are not interested in major systems integration applications. The ease with which Saas applications can be used by many users without resorting to vast IT implementation projects is a major selling point in the favor of Saas applications.
Another reason Saas is doing well is because even a small corporate player can get the functionality of a much bigger corporate player if Saas is employed compared to other systems.