Most small and medium-sized businesses (SMBs) require the same software capabilities as large enterprises but don't have the resources and in-house technical expertise necessary to manage it themselves. A study by the Cutter Consortium finds that many businesses are no longer willing to tolerate the long deployment cycles, ongoing administrative hassles, high operating costs, and low ROI associated with traditional on-premise software.

Consequently, an increasing number of organizations are seeking outsourced and hosted solutions, which offer comparable levels of functionality at a fraction of the cost. Now a viable alternative to on-premise solutions, Software as a Service (SaaS) adoption is expected to grow over the next several years. Research by industry analyst firms shows that the percentage of business software spending on SaaS will grow from 5% in 2005 to 25% in 2011.

New Life for Hosted Applications
Application service providers (ASPs), the first companies to offer software via the Web, hosted third-party applications in mini-data centers. The large complex software had limited functionality and required expensive server installations.

The current crop of SaaS applications operate at higher speeds and have greater capabilities because of breakthrough technologies and programming such as Asynchronous JavaScript and XML (AJAX). AJAX programming provides an intelligent and efficient approach to client/server interaction and enables automatic changes to content without requiring the full Web page to reload, allowing users to move rapidly between different areas of the application. Software applications end up operating much like familiar desktop software and provide similar functionality. For example, the improved interactivity and usability of the applications make it easy to conduct real-time actions, such as drag-and-drop, grab and scroll, and grab and zoom.

Advances in AJAX and other HTML standards, open source systems, and the increasing availability of open application program interfaces (APIs) have made it possible to develop and enhance SaaS more quickly and less expensively. SaaS providers now have greater customization and configuration capabilities. Many solutions enable administrators to configure the application across the entire business, setting parameters that meet the company's particular requirements. Customization also allows resellers and systems integrators to add new fields, create new interfaces, and integrate data from other software applications.

Integration used to be a challenge for SaaS applications and a deterrent for potential customers who needed the hosted program to integrate with their existing applications, databases, and architectures. Advanced integration middleware, service-oriented architectures, and open APIs are making it easier to create connections between software systems. Many SaaS vendors now offer a variety of options, such as file and batch transfer, and provide a defined set of programming interfaces to make it easier for customers to integrate their SaaS and on-premise applications.

"The advent of AJAX and other de facto Web-oriented application development standards has helped to accelerate the growth of the SaaS market by making it easier for users to implement and integrate on-demand software services," according to Jeffrey M. Kaplan, managing director of THINKstrategies and founder of the SaaS Showplace (www.saas-showplace.com).

A wider array of service options and capabilities will become available as developers make further advances in programming technology. Some experts suggest that an increasing number of SaaS vendors will offer fully functioning offline versions of their AJAX-based services that synchronize with a user's online account when reconnected to the Internet. Kaplan suggests the growth of offline capabilities is a natural market evolution for SaaS solutions.

SaaS providers will also continue to focus on improving security, reliability, and integration capabilities and enhancing features offered to end users. With its current market penetration and expectations for growth, it's apparent that SaaS is asserting its position in the software industry - an affordable alternative that allows SMBs to break free of costly enterprise applications.