Specifics of Software as a Service (SaaS)

The Truth About Software as a Service (SaaS)

SaaS has a distinct meaning that’s essential to understanding its role in your application portfolio. With SaaS, there’s just one code base for the software, used by all customers, in what’s called a multitenant architecture. While the software might be configurable by users to their individual needs, the code itself is the same for all and is not customizable for any individual customer. Any enhancements made based on one customer’s requests immediately become available to all customers. So forget competitive advantage or differentiation based on the software itself.

The underlying data model and system architecture of SaaS is also not customizable. The advantage in this for the vendor is that it spends less time managing compatibility and upgrades across several versions of the software. It also spends less to support customers, as they all use the same version and they don’t run it on their own equipment. That’s one reason that venture capitalists have glommed on to SaaS. The VCs also like the fact that SaaS can reduce startup costs, promising faster time to market, notes Warren Weiss, a general partner at Foundation Capital, which has invested in SaaS startups since 1996.