In our last newsletter, we kicked off a series of issues discussing new Internet-based software options that offer businesses affordable alternatives to traditional Windows-based software.

We discussed open source software as a means to leverage an existing publicly available programming code base in order to develop very affordable fully customized software solutions.

In this issue, we discuss the merits of hosted software applications, also know as SaaS or Software as a Service.

SaaS is a software application delivery method where a web-based application that runs inside a standard browser is hosted and operated by the software vendor at their own facility. Customers pay to use the software on an ongoing basis rather that paying up front for software licenses.

Hosted software applications save companies money and time by relieving them of much of the cost, resource requirements and risk associated with the deployment and operation of traditional Windows-based software.

With hosted software, there are virtually no deployment costs. Because the software is hosted and operated by the vendor and end users only require an Internet connection and standard browser software, individual user deployment is as simple as getting online and creating an account. The costs related to deploying traditional Windows-based applications such as servers, PC upgrades and software licenses do not exist.

For small businesses and independent professionals that do not have the luxury of an IT department to assist with software purchases and installations, the simplicity of deployment can make hosted software a very attractive alternative to traditional software.

Furthermore, the deployment of software upgrades, which can be as challenging as the initial installation with some Windows-based software, requires no end user involvement whatsoever. Because the upgrades are centrally deployed by the vendor, the user simply logs in and the new features are instantly available.

Hosted software is usually offered on a subscription basis. With very low or no startup costs (some vendors do charge a nominal startup fee), there is very little risk associated with starting to use the software. In addition, most vendors provide a no obligation free trail period, allowing users to test run the software before making any financial commitment.

Unlike most Windows-based software, there are no costly additional support contracts or fees that offer little or no value to end users. Customer support, phone and/or web-based, is built into the subscription fee. Good SaaS application vendors continually strive to improve and add features to their software and, as discussed above, users automatically benefit from these improvements without the worry of installing upgrades themselves.

Probably the most widely known and used example of hosted software is Salesforce.com. Salesforce.com is the clear leader in web-based hosted Customer Relationship Management (CRM) software, boasting over 35,000 customers and many more actual users. One of the primary reasons behind the success of Salesforce.com is that CRM software lends itself extremely well to the hosted software model.

There can be significant risks and barriers associated with the SaaS software model, which is why hosted software, which has been around for a number a years, has been slow to take-off in many software categories.

Successful hosted software relies on a large user base with each user requiring much the same functionality. If the software requirements differ significantly from customer to customer, the hosted software model does not work well.

There are also a number of risks associated with hosted software, which must be taken into account. With company data stored at either the vendor’s of a 3rd party hosting facility, businesses have been understandably reluctant to deploy hosted software for applications that collect sensitive data, such as accounting software.

There are also risks associated with the ongoing health of the software vendor. There can obviously be dire consequences if the vendor ceases operations and the software and all accumulated end user data is suddenly unavailable.

Salesforce.com has been so successfully due to the generic nature of CRM software, the relatively non-sensitive nature of the data, and the vendor’s growth and stability.

While hosted software works best with generic software solutions, this does not mean that hosted software cannot be customized. Good hosted software is highly configurable, allowing individual users to customize the features and interface to a certain degree. Some vendors offer customers the option to run their own instance of the software, which can then be fully customized based on the customer's unique requirements. While there are obviously additional costs related to this kind of customization, the customer still enjoys the cost savings related to the base application.

As the risks and fears associated with hosted software dissipate, hosted software offerings will become increasingly popular. Microsoft will soon be offering Microsoft Office and other applications as hosted pay-as-you-go software.

For the reasons described above, hosted software offers significant advantages to both the customer and the software vendor. Companies considering hosted software must consider these advantages as well as the risks before deciding which option is best for their organization.

When considering the options available when making software spending decisions, companies both large and small should now be considering hosted web-based software as an affordable, easy to deploy alternative to traditional Windows-based software.


Datapro Technology Solutions is an IT consulting firm that helps small and medium-sized businesses get the most from their investments in technology.

To find out more about the services we provide and how we might be able to help your business, visit our web site at dataproforbusiness.com or give us a call at 416-977-1991.