Software as a service

The provision of Software as a Service is not new; witness the number of Application Service Providers who evolved in the late 90s with almost as many having failed to survive the IT downturn.  Whilst there are variants to Software as a Service the following generally holds true:

• the software is hosted and operated by the provider or a third party (as opposed to being end users access the required software over the internet using a standard web browser;
• managed by an in-house IT department);
• a recurring (typically monthly) “management” fee is paid for the use of the service (i.e. the use of the hosted software);
• the software requires limited (if any) customisation and is typically standardised so as to facilitate use by a number of customers (however, this is likely to be subject to change going forward); and
• the service includes not only the provision of the software but also changes as to functionality, the provision of upgrades and new releases and maintenance (each of which are controlled (including as to the timing of their introduction) by the provider).

So, what are the benefits of Software as a Service?  Those promoted by its proponents include:

• Software as a Service provides more power and control to an end user in that they are only “locked-in” for the subscription period and can transfer to an alternative vendor without incurring the purchasing and licensing cost which would be associated with a traditional licensing arrangement.
• end users only pay for what they use; often end users over-estimate the actual software utilisation they require (and therefore incur additional cost for a project/service they do not use); of course, the converse may also apply!
• end users incur an initial lower cost of “ownership”; given the cost to operate the subject software application(s) is fixed it is easier for an end users to budget for the total cost involved.  In particular, Software as a Service involves not only the provision of the software but also the costs associated with its provision (including training, maintenance and upgrades).
• Given the provider manages the installation and upgrade process the cost and installation difficulties can be avoided.

With improvements to and increased reliability of the internet, providers have started to look at this model as a serious medium for delivering software.  The adoption of Software as a Service is in part driven by end users, who benefit from access to any application, from anywhere, on virtually any web-enabled device.  However, Software as a Service also provides better licensing flexibility, cost control and an assurance that employees are using the most recent version of the application available!

Proponents of Software as a Service argue that it has the potential to totally change the way in which companies run their IT infrastructure.  It gives companies greater access to a broad range of software and allows them to streamline and simplify their IT infrastructures, improve application deployment in geographically dispersed locations and realise significant cost savings.

Software as a Service may not always be the best solution.  For example, if the subject software is intended to be in sue for a reasonable period of time a perpetual (as opposed to subscription based) licence may be more appropriate.  As always, it is necessary to consider the commercial drivers and ensure the legal documentation properly reflects the agreement reached.