Cloud Computing

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Cloud computing buzz is everywhere and software-as-a-services is one of the key reasons,
many people talking about it. Software-as-services model is not just a proof of concept
anymore; it‘s a model that many business successes depend on. Frankly, many companies
adopted this model, and double their profit. This paper will be introduction to the Software-
as-a-services and talk about the types of model and its advantages and disadvantages.


Software as a Services (SaaS) concept has changed from dream to reality. Before SaaS was
proof of concept and now it‘s become a business need. Feels like Software Companies found
a new toy –SaaS to play with. No more, buying software, install it and then maintain it. The
Economist magazine believes that SaaS market is growing 50% a year. The SaaS has the
power to change the way companies use software; many top software company CEO‘s believe
it. Amazing thing about Cloud Computing is, no new inventions were discovered to do Cloud
Computing; researcher took the existing components –internet access and collaboration—and
put it together and gave us the Cloud Computing. Companies used to sell software on the CD
but now, no need to download software in order to use it. User can simply go to product
website and start using it, without downloading it to their machines. No more buying the
software CD from the Best-Buy, no need to worry if product is compatible with your system.
With the help of SaaS, user just buy service and its gives them freedom to use software on
multiple machines, location, and free them up from installing headaches. They don‘t need to
save data on their own systems and software‘s are always up-to-date.

Name background

 In February 2001, the Software & Information Industry Association (SIIA) wrote a paper
―Software as a Service: Strategic Backgrounder‖[1]. Before everybody agrees on ―Software
as a Service‖ name, many people were calling SaaS as a different names, such as: application
service provider (ASP), application infrastructure providers (AIPs), Internet business service
(IBS), business service provider (BSP), solution service provider (SSP) etc. Acronym such
as ASP also known as ―Active Server Pages‖ were confusing a lot of people, therefore SIIA
decided to use only one name: ―Software as a Service‖ to avoid confusion.
SaaS solves the major Data-backup issues. Some people do not backup there data at all and
some may only backup once a week or month. But if we use SaaS, our data is always safe,
data gets backup everyday by Cloud Computing providers. Google Docs is a classic example
of SaaS. To do any work in Microsoft Word, Excel, or PowerPoint related work, user do not
need to buy Microsoft Office Suite, they can simple use Google Docs to do any of it. Google
Docs is free and its allow users to store documents on Google systems. User does not even
have to store it on their systems and cluttered with all the documents. Netflix is also taking
full advantage of SaaS, to watch move at your home, you used to rent movie, which comes
via postal mail and takes 2-3 days. But now, you can stream any movie without any wait. Just
go to Netflix website and start watching it, think about it; no return hassle, no late fees.

Many Universities and companies do not have their own email systems anymore. They hire
Cloud providers such as G-mail, Yahoo, and other vendors to provide email to their customers
and students. For example, Universities could pay five dollars per account to Google and
Google will create email account for that particular student. In returns, Universities do not
have to maintain email servers; worry about running out of space, millions of virus that
students introduce is all Gmail issue.

To prove SaaS is really useful for the business, Software Magazine (
did the research and provided some data to back-up their arguments. They review small
manufacture that was able to save 63% by outsourcing their application [1].

Following data taken Reference [1].

Cost Comparison Between Having Software In-house and Renting It From an ASP

(Costs of Nine-Module Tier 1 ERP App for 50 Users calculated over 3 years)4

                                 In-House Deployment                                ASP (aka

In-house Budget Items            Year 1          Year 2         Year 3              Years 1-3

Hardware                         70,000          70,000         20,000              Included
(Database and
Application Servers)

Software                        800,000        200,000       500,000            Included

(50 Seat, 9 Module ERP

Personnel                       265,000        265,000       265,000            Included

(DBA & Tech Support)

Yearly Total                    1,135,000      485,000       785,000

Total                           +              +             $2,405,000         $900,000

Average Cost/Month (3           68,800         68,800        68,800             25,000

For a small or start-up companies, SaaS approach makes a lot of sense. This approach does
not require a lot of money up front to by servers and application. Companies can buy per user
licenses based on their needs. Using SaaS approach, companies has options, weather to use
latest technology or keep the old version around without too much cost. But, if companies buy
software‘s and new version comes along, the money companies invested in old software will
be waste. In January 2004, Microsoft decided to cut the support of Windows 98 systems, but
many people were still using the same operating systems and could not afford to update
operating systems, they protested it and Microsoft was force to change the date to June 2006
[3]. People were lucky to get that extension, but in today‘s technology world, they probably
would be forced to update their operating systems to latest version.

SaaS model has changed the way software companies do business. In the past, software
companies generate a lot of revenues by forcing customers to upgrade their software,
maintaining it for them, and other miscellaneous fees. But SaaS model caused revenue to
decline tremendously, and to make it up, companies started going into the services business.
As an ex IBMer, first I saw this change in the year 2005, instead of calling SaaS model, IBM
used the word ‗on-demand‘ or ‗blue-group‘. IBM Lotus group and Websphere group believe
in SaaS model very religiously.

Single tenant Vs Multi-tenant

SaaS model has two approaches: Single tenant and multi-tenant. Owning a single family
house is single tenant and owing a condo/town house is multi-tenant. Single family house
owner can do whatever he/she wants in their yard, but condo/town house owner must follows
the condo/town house association rules and regulations. Each type tenant has its own
advantages and disadvantages.

Single Tenant                                   Multi-Tenant

Cost is high                                    Cost is low

Systems and resources are not shared by         SaaS provider shares the systems. Multiple
multiple customers; it‘s dedicated to one       customers could be using same systems and
customer only.                                  applications.

Customer can customize the applications         Applications may not be customize or
based on their needs and preferences.           preferences may not be changes, if its effect
                                                others customers.

Some type of security is maintained, because    Data could be tempered because recourses
applications and systems are not shared by      are being shared by multiple customers.

Safe firewall can be created to protect data.   Firewall cannot be created because multiple
                                                customers need to access the resources.

Customer can backup data at certain time.       Data can only be backup when all customers
                                                agree to one time. If the customers who
                                                shares resources are two or more types of
                                                business, which could really cause an issue.
                                                  For example, a bank use cloud services and
                                                  has two divisions. One service deals all the
                                                  transactions that happen in the bank during
                                                  bank hours and another service is only deals
                                                  Automatic Teller machines (ATM)
                                                  transactions. After 5pm, when bank closed,
                                                  customers is not accessing any data, so if
                                                  services are down, it would not affect
                                                  customers, but ATM can be used anytime,
                                                  and bring down ATM servers can really in-
                                                  convince customers. Therefore, using two
                                                  separate systems for each service are really
                                                  the only solution.

Customer needs to train their staff or hire       Customers does not need to worry about this,
expert from big companies such as IBM,            it‘s all SaaS provider responsibility.
Oracle, on how to install, maintain their
servers and software‘s.

Resources are often under used and this is        Resources are almost never unused. Its
very expensive to many companies.                 shared by many companies, so someone
                                                  always using it.

Under used CPU cycles using electric power,       Customer does not need to worry about it,
and storage space, which is very costly.          because servers are on SaaS provider site.


SaaS model is the way to do business and it‘s a proven fact. SaaS model bring cost down,
energy, environment friendly, allows collaborate with others, consumers gets to use the
software without all the installing/maintaining headaches, it‘s very cost friendly, data can be
accessed from anywhere in the world with the presence of internet. Security is always a issue
 with everything, and SaaS model is also has to deal with it. A lot of progress has been made in
 internet security field, many researchers are burning mid-night oil to improve security, but we
 still have long way to go. Overall, SaaS model is a great model, this has more advantages
 than disadvantages, and that‘s always a good thing.


[1] Software as a service: strategic backgrounder. s.l. : Software
and Information Industry Association.


 author = {Nitu,},
 title = {Configurability in SaaS (software as a service) applications},
 booktitle = {Proceedings of the 2nd India software engineering conference},
 series = {ISEC '09},
 year = {2009},
 isbn = {978-1-60558-426-3},
 location = {Pune, India},
 pages = {19--26},
 numpages = {8},
 url = {},
 doi = {},
 acmid = {1506221},
 publisher = {ACM},
 address = {New York, NY, USA},
 keywords = {.net, configurability, saas, software as a service},

[3] Bowes, G., ―End of Support for Windows 98,‖ Welland
Tribune (Ontario), January 20, 2006, Pg. D5.


author={Vidyanand Choudhary},
booktitle={System Sciences, 2007. HICSS 2007. 40th Annual Hawaii International Conference
on}, title={Software as a Service: Implications for Investment in Software Development},
month=jan. ,
keywords={software as a service;software development;software licensing;software
publisher;investment;software engineering;},



author={Hancheng Liao},
booktitle={Information Management and Engineering (ICIME), 2010 The 2nd IEEE
International Conference on}, title={SaaS business model for software enterprise},
pages={604 -607},
keywords={SaaS business model;software as a service;software copyright licensing;software
enterprise;software product selection;software service selection;software upgrades;DP
industry;corporate modelling;enterprise resource planning;software maintenance;},

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