Are hosted applications the future?

Hosted applications have been gaining a lot of popularity lately. The term everyone is using for this way of delivering software is SaaS, Software as a Service, which was definitely one of the big buzzwords of 2006. There are plenty of examples, such as Google Docs & Spreadsheets, 37signal’s Basecamp,, not to mention the increasingly advanced email solutions from Google, Yahoo, Microsoft and many others. The question is if SaaS is just a hyped, temporary trend, or if it is here to stay.

SaaS vs traditional software

We will first look at the different pros and cons of the SaaS model from both a customer and developer point of view and then look at what is necessary for SaaS to reach widespread acceptance.

Customer point of view:


  • Access your applications and documents from any computer.
  • No installation needed.
  • No administration costs.
  • Runs on any computer with a Web browser and Internet connectivity.


  • Potential privacy/security issues (important data being stored outside your control).
  • If you’re offline, you can’t work.

SaaS developer (SaaS company) point of view:


  • Cross-platform compatability (you target Web browsers, not operating systems).
  • Central point of maintenance. New updates immediately available to all customers.
  • No piracy.
  • Potentially less support issues, and you only need to support the current version of the software.


  • Vast amounts of computer power, storage space and bandwidth needed on the backend, depending on the application.
  • Potentially added administration costs maintaining the infrastructure.
  • If something happens centrally, it affects all users at once.

The challenge – How to tackle the cons
For the SaaS model to become a long-term success and reach mainstream acceptance the pros need to outweigh the cons. Not only that, the cons need to be dealt with.

  • Internet connectivity issues: Reliable broadband Internet connections are already very common both at work and at home, and wireless Internet access is available in many places you would work outside the office. There are even airlines with Internet access available during flights. As the world becomes more and more connected, this issue will simply cease to exist.
  • Protecting confidential data: There are a lot of third-party services that have critical and often confidential information on their hands: banks, electronic exchanges (stocks, electricity, etc), law firms, advertising agencies, etc. This kind of trust needs to be extended to SaaS companies, and they need to show themselves worthy of it.
  • Site downtime affecting all customers: The SaaS company needs to have redundancy for as many elements of their hosted architecture as possible. Ideally they would even have geographically divided setups, so if one site goes down, there is still one working location.
  • Added administrative costs for the SaaS company: The cost of maintaining the infrastructure the software is running on is most likely offset by the other benefits such as less piracy, less support issues, immediate automatic upgrades for all users, etc. Since this is a problem for the developer and not for the user, it will at least not affect the general acceptance of SaaS in the eyes of the customers.

The SaaS model doesn’t suit all applications
Any application that stretches either RAM, CPU, storage or bandwidth usage on the server end will most likely be very inefficient as a hosted application. Examples include games, 3D modelling and rendering software, image and video editing software, etc. It will remain more practical to keep these as regular software running on local workstations.

SaaS is a blast from the past
The hosted application model is reminiscent of how most software used to run 30 years ago. Terminals (now Web browsers) were accessing mainframes (now server clusters or other high-capacity backend solutions) that were running the actual software. Of course, back then we didn’t have the Internet, but the principle is the same. Perhaps we are coming full circle.

And to answer the initial question: Are hosted applications the future? Yes, definitely, but not for everything. There will still be demanding software that is better suited for running locally on a workstation. That said, 2007 may very well be the year that SaaS goes mainstream.

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