In recent years, Traditional software license purchases have begun to seem antiquated, many are migrating and perhaps as many vendors and customers have migrated to a software as a service business model. Software as a Service, or 'SaaS', is a software application delivery model by which an enterprise vendor develops a web‑based software application, and then hosts and operates that application over the Internet for use by its customers. Customers do not need to buy software licenses or additional infrastructure equipment, and typically only pay monthly fees (also referred to as annuity payments) for using the software.
Demand for SaaS is being driven by real business needs: namely its ability to drive down IT related costs, decrease deployment times, and foster innovation. What this means is the market is going thru a radical change i.e., a transformation from the way IT traditionally was used for business. Huge Capital Expenditure and high recurring costs on maintenance simply could not justify its existence.
Today, Corporate buyers often have the ability to choose among a myriad of comparable software solutions–including lower cost SaaS solutions. SaaS not only alleviates the costs of traditional perpetual licensing fees but also eliminates the need for additional IT infrastructure investments to support new applications. In addition to fewer up‑front costs, SaaS is often easier to discontinue or substitute, reducing switching costs. Nowadays, many buyers are applying the same fundamentals to technology purchases as they have been to other acquisitions – focusing on total cost of ownership (TCO) and return on investment (ROI). The consensus seems to be that SaaS could lead to a potentially weaker bargaining position for sellers of traditional software products, and a stronger position for SaaS solution providers.