However, as often happens with so many terms in the IT industry, the definition of software as-a-service, or SaaS, has been over-stretched as vendors are jumping on to the SaaS bandwagon.
A growing number of on-premise software providers are now offering SaaS variants of the software, a recognition of the direction in which the future of the software industry is headed. But On-Premise Vendors are trying to pose as SaaS Vendors, creating a growing confusion being created for buyers of SaaS solutions.
Here's my own check-list of 4 things to look for when picking out a "SaaS fake":
Hosting and Subscription Alone Don’t Make SaaS
SaaS software runs on the provider's premises, not the customer's, and payment is by subscription spread over the term of the contract rather than as an upfront license fee. There are key advantages that flow from these, mostly to do with amortizing the cost of acquiring, implementing and operating the software. Costs are shared across more than one customer, yielding economies of scale.
On-Premise "and" On-Demand
On-premise vendors seem more flexible when they offer you both options. The SaaS model means a very different business model for the vendor in terms of how the solution is developed, hosted, sold and supported. A vendor seeking to do both is going to end-up running two business models. If you are looking for a SaaS solution, look for a vendor who is committed to SaaS and will therefore bring its best to you in the way their business is organized.
Multi-tenancy is the Key Differentiator
Multi-tenancy refers to having all customers running on a single unit of the live software. Unfortunately, there are countless vendors out there who haven't yet reached this critical level. Most of them are holding back from multi-tenancy because they're saddled with conventional software code that isn't architected that way. It'll take them time and a massive re-engineering effort to switch (if they ever manage to).
Simply put a vendor of an old on-premise software installs a copy of the system for the customer on a server (an "Instance") as opposed to a true SaaS solution provider who has a single instance of the application in which each customer is an account or a "tenant" (and hence multi-tenant).
Why should you care as a buyer?
There are huge benefits to be gained by the customer through true multi-tenancy.Most of the advantages that attracted you to buying a SaaS solution tend to flow from multi-tenancy and while it may seem like a great thing to have your own copy of the software, remember it also means that you will lose out on many advantages without really gaining much.
Low-risk Rapid Implementation
The most important is that customers don't have to wait for a custom technical implementation. With multi-tenant SaaS, the software is already up and running in the vendor's data center in advance. This has an enormous impact both on the customer's exposure to risk when getting started and on the vendor's business model. Having the software already operational means that customers can go live in a matter of days or weeks, and they're free to phase in the roll-out to cause minimum disruption to business operations. Vendors can offer try-before-you-buy trials and demonstrations at little or no cost, and there's a low overhead to adopting an iterative style of implementation in which a pilot group of users can test the look, feel and structure of the application and give feedback before a full production roll-out begins.
A true SaaS vendor having just one version of the software to upgrade and manage does it most efficiently translating into frequent and cost-free upgrades coming your way. EmployWise for instance adds new features almost every week and charges nothing for them. An uncertain upgrade release frequency and/or charging for these is a sure sign of a fake.
Customization vs. Configuration
This is a real twister, as a buyer you would probably be more attracted towards a vendor who offers to customize their solution for your specific requirements but this is another pointer to a probable fake. A true SaaS vendor will run one solution and not versions for different customers. This is done by either focusing on a customer segment that largely needs the same features or alternatively by engineering a high degree of configurability so that each customer can "configure" the solution as they need (EmployWise falls in this category). When they come across a new requirement, they will typically offer it as a feature enhancement and not as a paid customization.
Beware of the "FUD"
It is known industry ploy for existing players to first create FUD i.e Fear, Uncertainty and Doubt, to put off people from trying new innovations when threatened by them and then to follow it with Confusion by joining in without changing. We are now seeing the latter phase where everything in software is being relabeled as SaaS and "Cloud Computing". So dear buyer, its tough on you but you must look under the hood.