You are an ISV looking at on-demand delivery of your application - good for you! But... once you have sorted out scalability, configurability, tackled multi-tenancy and packed it full with cool features, be prepared to keep developing as your Hoster may not be able to help as much as you might expect.

In the summer Microsoft had lots of conversations with SaaS ISVs and Hosters to better understand the relationship that exists between them. One of the outputs is a white paper on MSDN.

Here is an excerpt from the paper:

"The case for specialized Software as a Service (SaaS) hosting can be easily rationalized by examining an incompatible pair of anecdotal fact and reality:

• Fact: When we explore the expertise of software vendors today, we find that most of them will not claim operating a hosting environment as a core competency. Actually, many would also cite operational excellence as a key barrier of entry into the SaaS market. This observation should not come as a surprise to the reader.
• Reality: However, when we take a look at the prevailing market situation, delivering SaaS applications often depends on hosting solutions that are “home-brewed” by the software vendors themselves. This is to say that in addition to implementing the application logic, many SaaS software vendors themselves will need to design, develop, and integrate the operational modules for their service offerings. As illustrated in Figure 1, the service delivery components, such as billing, metering, and logging, are built by the application vendor and integrated into the application stack.

The key observation from the datum above is that many ISVs are re-implementing operational components by necessity, not because those infrastructure additions provide significant value to differentiating the core features of the applications. Moreover, building these components add to the time and cost of delivering the application. Therefore, for the software vendors, most of such redundant work and expenditure can be eliminated if the software vendors can obtain the same operational functions from third parties that specialize in SaaS hosting."