While we weren't watching, SaaS or "software-as-a-service" has arrived, putting your software and data on a provider's server and letting you run it through the Web.

First, a SaaS provider was called a "service bureau," then an "application service provider." Now the focus is on the software — in addition to "software-as-a-service," it's called "software on demand" or "Web-based software."

It has a bit of a past, but does it also have a future? Absolutely.

THE NEW NETWORKS

Many things led the way to SaaS — the popularity of installation by download, remote data storage, automatic updating, online license verification, enhanced functionality under Web 2.0, and so forth. SaaS was the next logical step.

People refer to the "cloud" as the new platform for Web-based applications ("apps"), but there are actually multiple cloud platforms for SaaS apps. The most popular is Amazon EC2 (Electric Cloud). Another is the Google Apps Engine. These provide computing resources (computation, storage, etc.) that allow SaaS apps to scale easily and cheaply by leveraging economies of scale.

We saw the cloud spawn an industry when Apple rolled out its iPhone and its open architecture "Apps Store," resulting in thousands of new apps for the iPhone. One of them, iFu Kung Fu, was developed by Oceanit, a Hawai'i company.

EXPLODING MARKET

SaaS is growing quickly. Gartner says the SaaS market is expanding at 20 percent per year and is expected to generate revenues of $15 billion by 2012. Even small players with small market shares are making money.

Software giants are delivering their business apps via SaaS models, but generally don't act as SaaS providers for apps developed by other software companies. http://www.Salesforce.com, a leader in the SaaS provider industry, offers various apps from others. Its CEO, Marc Benioff, has ties with Hawai'i and is a member of the state's Innovation Council.

http://www.Salesforce.com has an impressive progeny — http://www.37Signals.com, for example, has a million customers and aims for the software "sweet spots" with projects that "just do what you need and nothing you don't." You don't have to install or download anything — just go to the Web site.

Locally, Phase2 International is a well-known SaaS provider at Pioneer Plaza, with sales offices on the Mainland. Its local servers are at the DR Fortress facility near the airport. It offers an array of third-party apps, and has subscriptions from over 300 corporate customers with some 4,000 users. It's an Act 221 company with 15 percent of its customers in Hawai'i, 60 percent on the Mainland and 25 percent international. It's growing fast. CEO Kevin Doherty says, "Keeping up with our growth is the challenge."

There are also many one- or two-man software companies in Hawai'i that are able to reach a global audience thanks to SaaS. An example of this is Truman Leung's Ascribe church management software. Other local SaaS companies include Sprout, Inovaware and soon, Ooi.

HOW ARE MY DATA?

Most office networks are not professionally run and have vulnerabilities. When you scale up to SaaS databases, you're bringing in professionals with training and security that's probably better than at the office. There's always the risk of a casualty or criminal. Sometimes, only insurance can make you whole.

If the Web goes down, SaaS is in trouble, but then we're all in trouble. You can always get redundant connections — they don't cost that much. Phase2 has three redundant connections. It stayed up during the recent Time Warner cable outage and HECO's blackout in December.

Facilities like the DR Fortress give Hawai'i an advantage. Customers on the Mainland or in Asia are comforted to know that their apps and data are remote and secure from natural and unnatural disasters. That's a big selling point.

SAAS IS A SERVICE

Ideally, the SaaS customer gets a suite tailored to his needs. Updates are automatic. If a better product comes up, the provider will find it, evaluate it and offer it to him. It's like nirvana when you know you're always getting the best you can get.

With SaaS, you can use thin client computers that don't have much memory or processing power, and consume very little energy. But it goes beyond the desktop — SaaS is also very useful in the field with wireless devices. How about a SaaS app that reads parking meters? Already done.

Your SaaS provider will build a menu of your apps, and teach you and your staff how to use it. If an app gets stuck, your provider is there, presumably 24/7, to fix things and answer your questions. After all, customers want to be able to call and get an instant solution.

BUILDING A BUSINESS

SaaS is about customer confidence. For that, providers need to take serious steps to protect customer data. They need to establish tight privacy, security and a disaster recovery plan. They need to store redundant data in remote centers so customers can call them in a crisis and retrieve it.

Good SaaS providers will steer clear of activation and data migration fees, configuration and customization fees, training and support fees and other nickel-dime charges. They will not require lengthy subscription commitments, and will allow customers to terminate any time. These things build customer confidence.

SaaS is a low-cost way to use software on a pay-as-you-go basis rather than by traditional software license agreements. There are no troublesome installations, and the customer is up and running immediately. SaaS permits the user to run the app from any Internet connection — office, home, travel, anywhere, and for that matter to have what is being called the "virtual office".

ON THE WAVE

HB 1680 is moving through the Legislature to implement the recommendations of the Broadband Task Force. The bill creates a "Broadband Commissioner" at DCCA and transfers telecommunications and cable functions from the PUC to that commissioner. This is an important change.

The bill hopes to provide broadband to everyone in Hawai'i by 2012 at "speeds and prices comparable to the average speeds and prices available in the top three performing countries in the world." A recent report rated Hawai'i 49th in broadband speed. That's embarrassing. To compete in the global market, we need to do much better than that.

As SaaS develops, it will become more cost-effective and popular, with many more apps. SaaS has a promising future, and building apps for it can be very profitable, and free of shipping costs. It can play a valuable role not only in building Hawai'i's tech industry, but in meeting the needs and budgets of industry, education and government.

We'll cover SaaS in our "State of the Web 2009" program on March 24. Call 956-8400 for details.