Three faces of SaaS
I was talking to some folks yesterday about this whole Software as a Service thing. While we were talking I started trying to define to myself what SaaS is. Now, I know there are many smarter more experienced people doing the same and that there is no right answer here. Instead I decided to break it down into three different business models that are supported by internet-based software.
Software supporting a business -- the Software as a Storefront model
Think of this as the Amazon model. Amazon is the product resale business. Their business model is about selling things and their storefront is an application on the internet. Amazon doesn't make money by providing their application any more than a dry cleaner with a web presence makes money through that presence. It's an enabling technology. (Let's ignore some of Amazon's new service offerings for the moment.)
Business selling interactive software- the Software as an Application model
This is the SalesForce model. SalesForce sells their online application and their business model is about making money selling that application. Another model comes to mind here that's like the SF model, but slightly different. SF sells their software directly to their customers. One (unnamed) company that I'm thinking of sells their software as a service to other companies who turn around and resell it. Maybe this is the service side of the Software as an Application model. In this case the company is an application provider.
Business selling service software - Software as a Service
In my opinion this is the model that makes Web 2.0 spin. It's about exposing interesting functionality so that other consumers can combine and compose new applications on top. A handful of "name brand" (without naming the brands) services jump to mind: map services, auction services, product inventory, and an ISV community around existing Software as an Application vendors.
This model doesn't imply anything about the user or developer experience. The service is the interesting bit to the provider. I can see service vendors also selling application software or other services (see one of the above models). This is the area that I'm most interested in right now.
What's interesting here is the business model. That is, if the service is effectively headless, and the end user doesn't ever see the 'service' then how does a company make money with this model? That's a question we'll all need to think about in the long run.