The difference between "ASP", "On Demand", and "SaaS"

What is the difference between ASP, On Demand, and SaaS?

I am frequently asked about the difference between the terms: Application Service Provider (ASP), OnDemand, and Software as a Service (SaaS).

Simply put, OnDemand Software refers to the delivery of software over the internet on a subscription or per transaction basis. OnDemand software is created in one of two ways. The first option, (v1.0) utilizes an ASP to convert legacy software applications (software that was not designed to be deployed over the internet) and the applicable hardware to fit the OnDemand definition. The second option, (v2.0) is for Independent Software Vendors (ISVs) or SaaS Enablers to develop the software from the ground up in accordance with the SaaS concept.

On Demand or “OnDemand”

OnDemand software refers to software that is:

(1) Accessed via a commonly used protocol such as the http (web)
(2) Priced in a cost-effective manor (subscription or per transaction versus capital investment)
(3) Requires the ISV or OnDemand company to maintain the software (often with the use of service level agreements or “SLAs”)
(4) Is hosted or resides at a centralized facility
(5) Capable of of immediate quick utilization (hence “on demand”).

As stated above and clarified below, there are two ways of making software available OnDemand.

Application Service Provider (ASP)

The concept of ASPs is far from new. Non-internet ASP models evolved piror to the conception of the internet. The airline industry provides an example of a non-internet ASP concept. I recommend visiting the article found at http://computer.howstuffworks.com/asp1.htm to further understand the concept of a non-internet ASP.

ASPs on the internet were the first companies to deploy, host, and manage access to traditional software (i.e. packaged) applications to multiple clients from a centrally managed facility. The traditional software applications and hardware infrastructures were converted to allow clients the ability to access the application over the internet instead of installing the software onsite.

As a result of this new delivery method, software pricing models began to change. Now that the ASPs had full control of the software, payment could be collected on a “pay-as-you-go” or “per transaction” basis. This revolutionized the software industry mainly because customers who normally could not afford the capital investment of software could afford a subscription based model. Think of ASP’s as the version 1.0 enablers who took existing applications which where not intended to be web-accessable and made them available to clients over the web for an affordable investment.

ASPs lead the way for delivery and pricing software as a service instead of consumers purchasing a software product. ASPs have several limitations based on the development of legacy software. These limitations are what lead to the concept of building and delivering new software in the SaaS model.

Software as a Service (SaaS)

You probably have a good feeling of what SaaS is now. SaaS is a model of software delivery (all activities that make a software available for use). Software in the SaaS model is paid for on some form of consumption basis (rather than the traditional perpetual license) and the application and server side hardware infrastructure is hosted, maintained, enhanced, managed, and upgraded the SaaS provider.

Links for more information

http://www.idc.com/getdoc.jsp?containerId=33453&pageType=PRINTFRIENDLY#33453-S-0001 - IDC 2005 software as a service taxonomy and research guide. This is a great research paper for anyone interested in SaaS.

http://www.wikipedia.org/ – This is a great site to look up definitions such as OnDemand, ASP, SaaS, ISV, etc.