Software saver: Paying only for what you use

For years,  IT has lamented over  the expense of software licenses and how fast their software gets obsolete. Looks like software vendors are finally listening, and

have come up with a way to take the sting out of buying their products.

The fastest growing segment of the software industry these days is something called “Software as a Service,”usually referred to as SaaS.

And despite the worldwide economic downturn, business for folks who provide applications this way is booming.

The market for software as a service (SaaS) is forecast to reach $9.6 billion in 2009, a 21.9% increase from 2008 revenue of $6.6 billion, according to Gartner, Inc. The market will show consistent growth through 2013, when worldwide SaaS revenue will total $16 billion for the enterprise application markets.

“The adoption of SaaS continues to grow and evolve within the enterprise application markets as tighter capital budgets in the current economic environment demand leaner alternatives, popularity increases, and interest for platform as a service and cloud computing grows,” said Sharon Mertz, research director at Gartner.

Here’s how SaaS works: A software provider licenses an application to customers for use only when they need it.

SaaS software vendors may keep the application on their own Web servers — which users visit and log in to so they can use the software. Or they’ll send the application to the consumer device, and disable it after use or after the on-demand contract expires.

The on-demand function can be handled internally to share licenses within a firm or by a third-party that shares licenses between firms.

The bottom line: You pay for only what you use.  Now there’s a business model cost-concious business leaders seem to be happy to see.

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