Wednesday, October 10, 2007

Why SaaS will make and why ASP didn't

I picked up blogging again last week when I wrote that the acronym SaaS does not ring many bells yet with decision makers. Maybe ASP does, but that is something many decision makers do not want to get involved with as that is so 90's.
Still there are many people that think that SaaS is the same as ASP. Take this definition for instance which I found on the web site of the Dutch research firm that concluded that SaaS is not known by many decision makers:
"SaaS (Software as a Service) is software provided as a hosted service which is accessed over the Internet, and which is billed through a subscription structure. This is also called ASP(Application Service Providing)."

Let me explain why I think this makes no sense. To start with, the delivery model is completely different: with ASP, you pay a monthly fee for a fixed period (sometimes even for the duration of 3 to 5 years), while with SaaS you only pay for the usage ("pay as you go"). This may sound trivial, but it has consequences for the customer orientation of the provider: because a subscriber is not tied to a fixed (maybe long) period arranged by a contract, which is the case with ASP, it is easier to make the switch to another provider. This implies that the SaaS provider must do more for client retention, hence deliver great customer service.
The architecture of products is usually also very much different between an ASP and a SaaS provider, mainly because SaaS products have been developed from scratch to be used over the Internet (take as an example). The ASP versions of products have usually been "web-enabled", but still have a typical client-server architecture. In the past, the ASP model therefore never fully delivered what it promised, because of the lack of bandwidth, or because of a performance degrade resulting from the web-enablement of the application.

In short: both the delivery model and the architecture of SaaS and ASP are different: SaaS solutions are generally speaking better prepared (optimized) for usage over the Internet, and its delivery model is more flexible than the ASP delivery model. So, we are dealing with different animals (that live in the same Zoo though, named Outsourcing). The key advantages of SaaS over ASP make that I believe that SaaS will succeed, as these are exactly the reasons why ASP did not succeed.

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