Software-as-a-Service, also known as SaaS, is an application hosted on a remote server and accessed through the internet (also known as 'the Cloud'). It is built as a multi-tenant architecture, which means that there is one code base for the application with each Client organization having their own database of information. They are also typically built using Web 2.0, which means providing each user with the ability to customize the look and feel of the application to suit their own and their company's needs.
Traditional software is purchased from the software vendor or a reseller and then is installed on your servers. You pay a licensing fee and then receive support and updates as part of your maintenance agreement for the software, which typically costs you upwards to 20% of the purchase price every year.

SaaS does not have licensing or maintenance fees. You pay a periodic subscription (usually annually). The software is not installed on your computer or servers, but is accessed over the internet (through the cloud). There are no maintenance agreements as it is all a part of the service. Upgrades and support are included. You have access to the software until your subscription expires.

• Reduced cost-of-ownership. You do not pay a single, large licensing fee and maintenance annually. You pay recurring fees, which are typically dramatically lower per year than the cost of purchasing the software. You also do not need your IT staff to purchase servers and install, monitor and maintain the software since it resides in the cloud.
• More frequent releases of software upgrades. Because there is only one code base, SaaS vendors do not have to worry about which browser and version you use, the version of Windows you have with which patch, which web and app server. No longer do they need to build and maintain multiple versions of the software. They install it on their cloud and only have to perform one install for all of their customers. So less development, installation and testing time are needed.
• Easier to customize. Because of the way SaaS applications are built (meaning multi-tenant), each Client can customize the application to suit their needs and not affect other clients and other users. All of this is stored in each Client’s database and does not affect the application or its code.
• Get up and running quickly. Since there is no installation (SaaS applications only use a browser) and since web 2.0 applications typically have more user-friendly designs, you can get up-and-running much quicker than with traditional applications with little or no training needed.
• Access from anywhere. Whether your team is located in your office, in another state, or on a continent half a world away, everyone can access the SaaS application as long as they have access to a browser and the internet.

Many larger businesses have sufficient resources, skilled IT administrators, and infrastructure to focus and monitor their security to ensure they are updated and working properly. Small and medium businesses' IT staff rarely have this luxury and therefore moving to a SaaS offering allows them to focus on other items and not worry about the security surrounding the SaaS offering. It is the responsibility of the SaaS vendor to manage, maintain and update the security solution 24x7x 365. Many SaaS vendors provide military-grade security, protecting data with secure, encrypted connections to firewalled servers.

The poster-child of SaaS applications is Salesforce.com, the customer relationship management company with $1.2 billion in revenue, 20% annual growth and 63,000 customers (meaning 63k companies, not individual seats) as of 2009.

Others include:

• Autotrader.com (marketplace for buying and selling cars & trucks)
• Google email and Google Apps
• Netsuite (accounting)
• Zagat (restaurant ranking)
• Travelocity (airplane reservations)
• eTrade, fidelity.com (financial services)
• Monster.com (online jobs)
• Amazon (online books and more)
• Dell (hardware and services)
• TOMOS Software (of course!)
• Microsoft, IBM, HP, SAP, Yahoo, Google, Oracle and others are racing to offer more SaaS applications!

• When you need faster deployment of software applications.
• When you lack the IT resources or infrastructure to run software internally.
• When you need to focus on internal IT initiatives, not manage another software solution.
• When you need to lower the overall costs of your IT group.