The software distribution and licensing model referred to as Software as a Service (SaaS), hosts applications through a cloud provider, making them available to end-users over the internet. Through the model, independent software vendors will most often contract third-party cloud with industry-leading host cloud providers to host the applications. Large hosting corporations like Google, Amazon and Microsoft, for example, act as both the cloud provider and the software vendor. The good news is that these firms are extremely efficient in providing the hosting services and offer very comprehensive Information Security certifications like the ISO 27001 and Soc Type II reports, and Standard Contractual Clauses that all help provide end users with confidence that their data is  secure, properly protected and used in accordance with relevant regulations.

Cloud computing has a few necessary components, one of which is SaaS. Alongside this are Platform as a Service (PaaS) and Infrastructure as a Service (IaaS). A variety of business users, IT professionals, and personal users utilize SaaS applications. The products offered through SaaS include products for personal entertainment, such as Hulu or Netflix, to more advanced IT products. Unlike PaaS and IaaS, products offered through SaaS are usually marketed to B2C as well as B2B users.

Based on recent market reports, analysts from the technology industry predict that the Software as a Service market will continue to grow over the next several years. Research indicates that the market for these products will continue to flourish, hitting close to $200 billion by the year 2024.

How Software as a Service Operates

Software as a Service operates through the cloud delivery model. The product provider will host the application and its related data through its own databases, servers, computing resources, and networking. The software provider could also host the application by being an independent software vendor, which hires a cloud provider in order to host the application through that provider’s data center. Their application will then be available to users on any device that has a network connection. Most SaaS applications are usually accessed through web browsers.

In return, companies that use SaaS applications are not required to set up and maintain the software. The users will simply cover the subscription fees in order to access the software, in a ready-made solution.

Closely related to the SaaS model are on-demand computing as well as the Application Service Provider (ASP). Both have similar models for software delivery in which the provider will host the customer’s software and then it will deliver it to approved end-users online.

The Advantages of a SaaS application

For many organizations, Software as a Service eliminates the need to run applications in their data centers or their own computers. This removes the expenses typically required for hardware acquisition, maintenance, licensing the software, installing the software, and providing support.

Other notable benefits of the Software as a Service model include, but are not limited to:

Scalable Usage

Services like SaaS will have a higher level of vertical scalability. This then gives customers the choice to access fewer services, or more, on-demand. Customers can quickly scale to meet unforeseen demand, and they are not confronted with the challenge of trying to upgrade their hardware platform or operating system all the time, that becomes the host providers responsibility. In addition the host providers have the scale necessary to also offer additional premium service like disaster recovery, or redundant operations.

Customization

A SaaS application is usually customizable, but that is not universal. One of the advantages of  many large SaaS providers is that their service is extremely reliable because they insist end users run the same software; as as result they often offer various user-selected customization configuration options within that standard software; its not quite customization buts clearly a step in that direction. The application can also be integrated to work with other types of business applications, particularly across other applications that come from the same software provider.

Accessibility

When delivering a SaaS application, the vendor will do so online. The application can then be accessible to customers from any location and through any internet-enabled device.

Automatic Updates

Instead of buying new software, a customer can depend on the SaaS provider to manage and automatically perform any and all required software updates, as mentioned above. This will further reduce the responsibility and burdens usually placed on in-house IT staff.

Flexible Payments

Instead of purchasing additional hardware for software support or additional software to install, customers have the option to subscribe to a SaaS offering. By transitioning the costs to a continual operating expense will allow a vast majority of businesses the opportunity to develop better budgeting. Users are also provided with the opportunity to end offerings and halt any recurring costs.

The Challenges and Risks of SaaS

It is important to note the risks and potential challenges that arrive when entering into a SaaS agreement. Businesses will need to rely on other vendors that provide the software, maintain the software, and report accurate billing information, all in a safe and secure environment for the company’s private data.

The following are potential risks that arise in SaaS:

Cloud Security

Security is usually cited as being a substantial challenge for Software as a Service applications.

Difficulty in Switching Vendors

When using a cloud service provider, some customers may find it difficult to switch vendors. In order to do so, customers have to migrate a very large amount of data, which is not a quick and easy task to complete. Also, vendors may sometimes use proprietary technologies that can complicate the process even further. A challenge known as vendor lock-in happens when customers are not able to transition easily between service providers as a result of their conditions. It is very important to have a comprehensive exit plan in place when you move operations to the cloud, the same as you would if you were outsourcing the operation. Essentially you need to understand how you can bring that operation back in-house or shift it to another vendor, in the event this relationship deteriorates, and you should not be making that plan when you are under pressure to proceed with that sort of transition.

Hire an Experienced Technology Licensing Attorney

Developing or entering into a Software as a Service agreement for your business can be very intimidating. If this is your first time encountering a SaaS agreement, you may find that they are difficult to comprehend, much less design and control. The agreement encompasses a wide variety of elements that have to work together to protect your assets and intellectual property. While templates for these contracts are readily available online, these cookie-cutter agreements will not provide sufficient protection in the event of a dispute for your unique business. Software as a Service agreements are an integral part of many businesses and as an important legal document, it is essential that you obtain the support of an experienced attorney.

Technology Licensing Attorney John P. O’Brien is well-versed in SaaS agreements and can help you design your company’s contract from start to finish. Whether you are entering into an agreement or are developing one, having the support of a skilled attorney will help you identify key issues before they arise. Further, an experienced attorney will ensure your interests are protected in the contract. Consider obtaining the support of Attorney John P. O’Brien when entering into a Software as a Service agreement. You can obtain a free, no-obligation consultation by completing the online contact form here so that you can learn more about how Attorney O’Brien can advocate on your behalf.