Software as a service (SaaS) delivers software and services over the internet. It can be seen as an alternative to installing, owning, or using on-premise applications services that are accessed by paying for subscriptions instead of buying them outright. So, what has been the timeline of SaaS, and how has it affected the world?
In the past, IT services were rented by a company for use in their own data center. Things are different today because solutions are typically ready-to-use software delivered online.
This includes FaaS (Function as Service), PaaS (Platform as a Service), IaaS (Infrastructure as a Service), DaaS (Data as a Service), and DAS or Desktop-as-a-service). The history of these terms is almost identical; for this post to be simple, we will assume they mean the same thing.
Timeline of SaaS
Internet Software Evolution in Cloud Computing
In the 1950s, a new type of software came about on mainframe systems different from the operating system.
In the 1960s, early computer programming was done on midrange or minicomputers and would code each application in its own language.
In the 1970s, there were applications that you could install on your personal computer or microcomputer.
In the 1980s, computers were mostly found in offices and homes. They came with personal computer application suites such as Microsoft Word or Lotus 1-2-3 that helped organize data for people who used them.
Enterprise app suites started to shift from the mainframe computer and client-server architecture in the 1990s.
The 1990s introduced the first SaaS application, and it had a managed hosting service. It also had ASPs (Single-tenant).
1998: Saw the creation of the first multi-tenant SaaS application.
With the 2000s, companies started to invest in software that made sales more efficient. These programs were usually built for specific purposes and included apps like Salesforce.
In 2010, Salesforce proved that the future of software delivery is in SaaS.
In 2010, SaaS applications were refined to contain practically everything previously offered as bundled software.
The Early History of Software Industry (the 1960s-1980s)
The history of SaaS is fairly short and not like the length or complexity found in a history book. The concept was introduced by IBM, which started renting out its computing power to large organizations such as banks. At the time, businesses were primarily concerned with utilizing mainframe computer resources and building their own software.
The first software as a service was born in the 1960s when only large businesses could afford to buy very costly and big computers. Many small companies used utility computing systems or time-sharing to pay for terminals connected to a mainframe or centralized computer.
Computers were expensive, so the government developed a network to allow companies and other institutions with less computing power access without spending too much money. This way, they could get their work done faster.
Old time-sharing systems were used in the 1980s. They remained popular until computers became cheaper and more powerful around that same time.
Before the personal computer, people relied on time-sharing systems for their business. They were okay with this until they had a taste of what was to come: locally installed apps and software instead of time-shared ones.
SaaS became popular in the late 1980s and early 1990s as computers became cheaper, the internet expanded, and employees started to have their own computers at work. This led to less reliance on timesharing systems.
Before the advent of computers, businesses relied on a hub-and-spoke system to store and share data. This meant that employees had limited access to critical information stored at other company branches or centralized servers.
Businesses recruited network managers/admins to ensure that corporate networks run smoothly, that data is backed up, that hardware/software is maintained and upgraded, and those other relevant activities are completed.
While major corporations may afford specialized IT departments and networking experts, small businesses rely on network managers to execute various tasks, including teaching existing and new employees how to utilize the network appropriately.
For the most part, only a few businesses had the human-resource capacity that had formal training or up-to-date skills in operating, maintaining, and scaling local area networks. It was also difficult to determine how much money should be allocated for these positions because they are often underpaid and overworked.
The Progression of SaaS
USI and Futurelink were the original forerunners of cloud computing as we understand it today. Today, SaaS is more specialized than in 1998 when USI first came out with ASP, which essentially did for computer programs what Netflix does now.
Initially, ASPs were used to supply and administer software from third-party suppliers primarily. Today, more SaaS providers offer their own programs that can be accessed via a browser or app on your phone. This is not all, though; in the past, most of these apps were traditional client-server programs that had to be installed onto computers.
The change in the delivery method of SaaS software has been monumental. Early ASPs gave hybrid software solutions that could install, but now it is all about online app distribution. The difference between modern-day providers and those early on was that they would maintain a separate instance for each business client, while today’s models allow them to share resources with other clients.
The software for computers was becoming too complex and resource-intensive to be handled by the hardware, so companies were looking into having their data hosted by 3rd party servers. They ran thousands of systems with many apps that had space constraints.
When the internet was first becoming popular, companies quickly realized that it would be cheaper and more efficient to store their data off-site. This led them to create Application Service Providers, which allowed businesses access over the internet.
Modern centralized computing was referred to be ASP. Like today’s SaaS vendors, these firms offered managed business software and hosting. Businesses could save money by not investing as much in equipment or the specialized resources required to maintain it.
In the 1990s, security was a major concern for businesses because they felt that their data would be in jeopardy if stored on third-party systems. They saw new start-ups as a risk to this sensitive information and hesitated from using them until much later.
The most preferred enterprise apps were payroll, CRM, and accounting. Businesses began to switch from one-time or perpetual licensing to subscription-based licensing.
The reason? Lower costs and better scalability within the SaaS industry.
ASPs to SaaS Providers
ASPs were not a big success, but SaaS might never have evolved without them. The main reason behind the shift from ASP to SaaS is that ASPs overpromised and underdelivered on their promises; these included remote apps with complete functionality, low price, quick deployment, and seamless updates. Virtualization technology aided the transition from ASPs to SaaS by allowing providers to build occurrences for each business user as required quickly and at much lower costs. And finally: it turns out that most of what was promised by the SaaS providers switch was true—they mostly delivered on these promises.
The First SaaS Company’s Extraordinary Journey
Concur began its journey as a typical software company, selling CDs and floppies to businesses. They were the first major company in their industry to sell directly online instead of through stores.
It learned its mistake and evolved into a SaaS supplier of software that required a web browser to operate. With over $600 million in yearly sales, SAP purchased Concur worth $8.3 billion in 2014, making it the largest SaaS takeover and only something a handful of SaaS businesses have been capable of doing.
Concur’s success can be attributed to two main factors. The first is that they were persistent and built a revolutionary company in its field of work, which made it stand out from the competition. Secondly, allowing for a comparison between the standard license model and SaaS. Concur moved their product away from CDs into SaaS; this increased gross margin by around 20% due to decreased cost associated with retail store commissions.
The gross margin increased in 2010 to 72% because of economies of scale. Concur was one of the rare corporations to achieve both Cash Flow Break Even (CFBE) and positive net income. This makes them one in only a handful of corporations to have survived two primary business models of evolution.
In Sum about SaaS’s Future
The timeline of SaaS has been around for over five decades and is still growing rapidly. Experts believe that the best of what it offers hasn’t even come yet.