Hosted Applications versus SaaS Applications

February 23, 2010
By djohnson

Julia King in Computerworld Article, Beyond CRM: SaaS slips into the mainstream, presents macro statistics as well as individual stories about the burgeoning SaaS industry.

Statistics we pulled from the article:

  • IDC projected a 36% worldwide growth in 2009. The number was revised upward to 40.5% as a result of the recession.
  • Gartner expects SaaS revenue to total $7.5B in 2009, nearly 18% higher than 2008. By 2013, SaaS spending will hit $14B.
  • Computerworld study reported that 42% of survey respondents reported using SaaS in their organizations.

Impressive growth forecasts, but we need to be clear what is being forecast. The definition of SaaS means different things to different people. For example, the article describes several SaaS applications, then adds “even Schumcher’s PeopleSoft applications, including all financial software, run as a managed set of services.”

Is (PeopleSoft running in a managed environment) = (SaaS application)? In our opinion, no.

What is a Hosted Application versus a SaaS application?

The table below describes some of the characteristics which differentiate a SaaS offering from a hosted offerings.

  Hosted Applications
(license plus hosting)
(software as a service)
Software license
Purchased and owned Rented from SaaS provider
Software location
Customer selected hosting center Determined by SaaS provider
Software upgrades
Installed by customer Installed by SaaS provider
Backup services
Managed by customer Managed by SaaS provider
Financial model
Capital expense Operational expense
Deployment model
Usually single tenant Usually multi-tenant
Cloud model
Internal or external cloud External cloud

Many other characteristics are the same. Both require Internet access. Both can be web-based or require client software. Many SaaS applications can now be customized to nearly the same extent as licensed applications.

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