SaaS VS ASP – Understanding the Difference

While the difference between SaaS and ASP is quite significant, most people often confuse the two models because they are both “hosted.” 

However, Application Service Provider (ASP) is much closer to Legacy Software than Software-as-a-Service (SaaS).   

For many people, it is very difficult to differentiate whether a web-based solution is a SaaS offering or just another ASP-hosted instance of an on-site application. However, there is a significant difference as you are about to realize. 

Typically, ASP is used to provide computer-based services to clients over a network.   

It allows customers to gain access to an application program via a standard protocol, such as CRM over the Internet or HTTP. 

One of the major advantages of ASPs is that small and medium-sized businesses can get specialized software. However, it is often unaffordable for many. It also eliminates the physical need to distribute the software, including the upgrades.   

On top of the software, ASPs will also maintain up-to-date services, including physical and electronic security, 24/7 technical support, and built-in support for the continuity of business activities and the promotion of flexible working. ASPs provide a way for businesses to outsource some or nearly all aspects of their IT needs.   

The following are 5 subcategories of ASPs:

• Enterprise ASPs – deliver not only high-end business applications but also broad-spectrum solutions
• Specialist ASPs – provide applications to meet a specific business need, such as human resources, Website services, credit card payment processing, etc.
• Local/Regional ASPs – supply various application services for small businesses within a limited area
• Volume Business ASPs – generally supply low-cost prepackaged application services in volume – from their own site – to small and medium-sized businesses. A good example is PayPal
• Vertical Market ASPs – offer support to a particular industry, delivering a solution package for a certain type of customer, such as dental practice or healthcare in general.

Similarly, SaaS – as a software delivery model – provides a platform in which software, as well as the associated data, is centrally hosted on the Cloud, and the users can quickly access the software from their web browser. Just like ASPs, SaaS also provides software that is available over the internet.   Regardless, there are some minor differences between the two.

Differences Between SaaS vs ASP

Ideally, SaaS extends the ASP model idea. While ASPs try to focus on managing and hosting 3rd-party ISV software, SaaS vendors manage the software they have developed on their own.   

In addition, ASPs provide more traditional client-server applications, requiring the installation of software on users’ PCs. On the other hand, SaaS relies solely on the Web and can be accessed via a web browser.   

Additionally, ASPs’ software architecture requires that, for each business, you must maintain a separate instance of the application. However, SaaS does not maintain such requirements, as SaaS solutions use a multi-tenant architecture in which the application serves multiple users and businesses.   

Users access SaaS over the internet, and it works in maintenance and service operations. Also, users pay per use and not as per a license, while the provider is responsible for the maintenance and storage of data and business logic in the cloud.   

A major advantage of SaaS is that businesses can potentially reduce IT support costs by outsourcing their hardware and software maintenance and support needs to the SaaS provider.   

Typically, SaaS is mostly utilized as a delivery model for several business applications, including Office & Messaging software, Management software, DBMS software, Development software, CAD software, Virtualization, collaboration, accounting, human resource management (HRM), customer relationship management (CRM), enterprise resource planning (ERP), management information system (MIS), invoicing, service desk management, and content management (CM).   

However, ASP is a failed model because of the following reasons:

• It lacks scalability for the vendor
• No inbuilt aggregation of data
• Too much customization
• Generally a single revenue model
• No network effect data for collection and aggregation

While there are some vendors who have found success with the ASP model, this success has been limited due to issues of scalability and customization between systems.   

Always Up-to-Date With a SaaS offering, the software you are using will always be the most current, as your software providers always apply regular updates, maintenance, and latest enhancements.   

ASP, on the other hand, would require the provider to update each customer’s instances one by one, making regular maintenance and updates costly and time-consuming. What this means for ASP customers is that necessary maintenance and market-driven enhancements are batched up and often delayed for months. 

Designed for the Web Since a typical SaaS offering is built from the ground up rather than being retrofitted for the web, it can take full advantage of today’s web capabilities. In ASP, vendors offer the choice between an on-site application and a web-based instance.   Ending the SaaS VS ASP Confusion SaaS is an all-inclusive business architecture and a value delivery model other than a software delivery method. 

As explained earlier, SaaS is characterized by an inbuilt multi-tenancy, allowing for shared resources and infrastructure.   Since SaaS is scalable, vendors can take full advantage of economies of scale to reduce complexities common with customizations, as well as reduce overall operational costs.   

So, the SaaS vendor enjoys many benefits, including the fact that resources are utilized efficiently and overall costs are reduced.   

This is because the inbuilt multi-tenancy of the SaaS business architecture can be leveraged to help reduce sales cycles and in turn accelerate revenue, improve customer service and retention, gain and maintain competitive advantage, directly monetize beyond the SaaS application, and improve strategic planning abilities.   

An application deployed in a single-tenant/ ASP model, in most cases, means the product does not support multi-tenancy, and the vendor is not willing to invest his/her time in re-architecting the product.   It also means the product was not properly commercialized, but thought of as software rather than as a business, and probably lacks inbuilt revenue model support, billing, advanced metering, etc.   

Final Thoughts

Between SaaS and ASP, the reality on the ground is that single-tenant applications, such as those in ASP models, are not architected properly to support the demanding business requirements surrounding the SaaS business architect.   

Overall, between SaaS vs ASP, an application designed and created specifically as a SaaS offering is safer if you want to use a web-based application, as it will also be easy to scale without incurring further costs.