Another kind of Saas: The village of Saas-Fee and surrounding mountains, in southwestern Switzerland. Photo by Robbie Shade, CC license.

Everyone has a SaaS version of the software your business is considering, right?  Vendors know that terminology like SaaS and cloud trigger generally positive reactions from potential customers — having these options implies the vendor is up to date with the latest advances in software platforms.

Never mind what the vendor calls it.  What you need to understand right from the beginning is: who owns the software, where is it hosted, and how is it priced?

  1. True SaaS is software that you do not own and do not maintain.  Some vendors will promise to maintain their software and to support your users, but the application nonetheless is installed on one of your servers.  This is not true SaaS.
  2. An application that is customized just for your business, hosted by the software vendor, and whose costs are just spread out over a period of years via monthly payments, is not true SaaS.
  3. True SaaS is priced like a subscription, one that is, say, monthly, and that you can cancel at any time.
  4. True SaaS will have little or no startup costs.
  5. A SaaS application can be what is called “single-tenant” or “multi-tenant.”  The former means you are using an application that is configured just for your enterprise; the latter means you are using the same base code or a copy of the same base code that many other firms are also using.  The former will cost more.

Why would companies say their software is SaaS when it really isn’t?  Because the term SaaS has a halo effect — it implies the solution is advanced, quickly implemented, efficient, and inexpensive.  A vendor can even make the pricing look like Software-as-a-Service (#2 above).

Know the details before you waste too much time.

Related: A Software Vendor Checklist