The History of SaaS

What is Software as a Service?

Before getting into the timeline of SaaS, let us first explain what it is. The phrase “Software as a Service” is quite a general expression, and can have different interpretations for different individuals. For the intent of this article, SaaS is the same as cloud computing. Software as a Service (SaaS) is often equated to Infrastructure as a Service (IaaS), Platform as a Service (PaaS), Desktop as a Service (DaaS), Mobile Backend as a Service (MBaaS), and Managed Software as a Service (MSaaS). These words are all included in the terminology associated with cloud computing.

At this time, the most common type of software as a service utilized is customer relationship management systems. Software applications that make use of the SaaS model of delivery are typically office and messaging programs, payroll programs, CAD systems, accounting software, content management systems, and antivirus tools.

What separates these SaaS platforms from traditional software? The foremost distinction is that your information (as the customer of the software-as-a-service firm) is sent over a network (like the internet) to the SaaS provider. The program does not stay on your computer – it is stored on an external machine. You submit your information to the supplier, and the vendor distributes all app-associated data across the web to your desktop. Now that we’ve given a description of Software as a Service, we can discuss the starting point of its inception.

SaaS Has Been An Established Business Model Since the 1960s

In the 1960s, computers were enormously big and expensive. Very few small and medium-sized enterprises would be able to finance the purchase of a computer. This is the reason why the software delivered as a service industry was established.

Throughout the 1960s, the precursor to today’s cloud computing or software as a service (SaaS) was known as a time-sharing system.

This system consisted of multiple non-functioning terminals (consisting of only keyboard and monitors, no CPU) that were linked to either a mainframe or mini-computer (usually through the use of a hub-and-spoke network structure). All applications and data remained on the mainframe.

You put in data via the terminal keyboard to use the system. Data was transmitted from the mainframe/mini-computer to the suitable terminal display. It was one of the first ways of joining computers together, which today we refer to as the “internet”.

This system could be utilized by small and medium-sized businesses, educational organizations, and government entities to acquire up-to-date technology at an affordable cost. These companies found it too expensive to buy and maintain the necessary equipment and programs, in addition to the cost of training staff, so they chose to use SaaS as a cost-effective way to remain competitive.

This kind of Software as a Service system was maintained throughout the 1970s and 1980s. The cost of computers and their physical size were shrinking annually, but a lot of companies still found it more convenient financially to stick with SaaS.

Over the course of this time, offerings such as customer relationship management, payroll processing, and accounting were provided through a software-as-a-service platform. This system relied on a specific phone line and modem to be able to send and receive data from customers. Meanwhile, the applications were simple, text-based interfaces. In most instances, since the information that was being sent was composed of text or other minimal data, there was hardly ever a requirement to move bigger files.

Cloud computing has allowed for software to be installed on external servers not located onsite, and in certain scenarios, these are maintained by third-party companies. This shrunk the amount of maintenance needed and made it easier for an ever-growing global staff, because with software stored in the cloud it could be accessed from any location.

With advancements in the internet, the cost for hosting decreased, allowing platforms to remove a lot of the preliminary data transfer limits and also making conducting business operations via the internet more reliable and efficient.

The advantages of being cost-effective, user-friendly, and having better fundamental features resulted in tremendous development in SaaS. Today, it’s a practical option even for enterprise-level businesses.

1. SaaS in the beginning.

In the 1960s, computer hardware technology was progressing rapidly. Nevertheless, computing was still lengthy and the price of a mainframe computer was far beyond the budget of most companies. That’s where time-sharing comes in. That’s where time-sharing comes in. In 1961, the first successful demonstration of a Compatible Time-Sharing System (CTSS) was made by researchers at the Massachusetts Institute of Technology.

2. Pre-SaaS computing.

In the upcoming two to three decades, the cost of computer hardware and devices decreased significantly and made them more compact. When businesses started to transition, they moved towards having personal computers and software that was installed on the computer which was attached to a purchased license.

However, it was shown to be inefficient when used over a wide area- not just for the technical staff maintaining it, but also for the software designers marketing it.

IT was struggling with the installation and updating of software, security patches, maintenance of personal computers, and the upkeep of associated hardware and infrastructure. Software businesses had low earnings due to their COGS (cost of goods sold) – the cost of distributing software on discs in product packaging.

3. Rise of dot com.

In August of 1994, a major advancement happened to the internet.

Online Transactions

Daniel Kohn was the one who did the inaugural secure credit card transaction for an actual item, which happened to be a Sting CD. In an article published in the New York Times the very day after the transaction, the reporter wrote:

Commercenet and other groups have been attempting to establish a regulation for the automated encoding of business trades, but the fresh alumni from college who built the Net Market Company in New Hampshire seem to have been the first to put these practices into effect effectively.

After that, the developments that created the ecommerce we know now progressed quickly.

In October of 1994, Netscape Navigator pioneered the use of the Secure Sockets Layer (SSL) protocol, enabling users to shop online securely as it encrypted the data they transmitted over the internet.

Online Marketplaces

In 1995, Jeff Bezos established Amazon and Pierre Omidyar brought forth AuctionWeb, later known as eBay, the pioneering peer-to-peer auctions platform.

By the year 2000, Amazon had already expanded into the sale of other types of products besides books, and had started to permit third-party retailers to use its platform for their own ecommerce efforts.

Online Cloud

The growth of the internet created opportunities for cloud computing to come into existence. Software could be set up on off-site computers which were often taken care of by someone other than the person commissioning the work.

By storing and running programs in the cloud, it cut down on how much upkeep was needed and enabled a more international staff to utilize it, since everything could be accessed from wherever.

A change happened because of the enhancement to features, resulting in organizations picking software that specialized in one key task, and making it possible to only use the software which would fit their business best.

4. Creation of application service providers.

The idea behind an Application Service Provider (ASP) is fundamentally the same as Software as a Service (SaaS): they both provide access to cloud-based software services via the internet. But, whereas SaaS is self-service, with the ASP model the vendor had to manually create each login and environment.

5. SaaS officially is here.

In 1999, Salesforce initiated their customer relationship management (CRM) platform, being the first SaaS product designed from the beginning to reach substantial expansion. It turned out to be a beneficial investment because the dot-com crash in 2001, not long before the Great Recession, had a noticeable effect on on-site software.

At first, people believed that the SaaS model was meant for only early companies and small companies, disregarding it as merely a passing trend and too limited, too sluggish, or unreliable. In the following years, advances on the internet that were not significant to the traditional software industry had a major impact on SaaS.

At the start of the SaaS sector, people commonly thought that subscriptions for software would not be a good option for enterprise companies. In those days, companies normally opted for full software packages to oversee their intricate processes.

6. SaaS reaches ubiquity.

The accelerated expansion of SaaS combined with the steady enhancement of its capabilities makes it a sensible solution for companies on all levels, including businesses of a large size. It’s also much cheaper and easier to use. Many people using SaaS point to cost savings as one of the main advantages.

There is a wide range of SaaS products available for just about any type of business requirement.

7. Future of SaaS.

It is clear that SaaS is gaining traction in the software sector, with Microsoft, SAP, Oracle and IBM all transitioning to it. As use of the SaaS industry increases, here are some of the potential changes that could occur in the software industry.

IT and the CIO must modernize in order to stay relevant as companies increasingly target their SaaS apps towards non-tech personnel. In exchange, IT is given the duty of acting as an assistant to the business, ensuring that buying choices are in line with the company’s overall aspirations and IT plan.

Emphasis on automation has increased: Software as a Service has enabled businesses to more easily integrate Artificial Intelligence technology into their technical infrastructures. Employing chatbots with advanced intelligence for more rapid customer service is one example.

APIs will maintain their significance as SaaS products offer opportunities for more open connectivity. By collaborating more, even smaller companies can have an easier time employing business intelligence to enhance their procedures.

SaaS has grown tremendously since its beginning and embracing openness will result in greater adaptability. It’s now much more adaptable and will carry on becoming more accessible and personalizable through a further focus on Application Programming Interfaces. The attribute of adaptability will create the type of interconnected systems that businesses of the future will require – like smooth interactions between your online shop and other programs such as IMS/OMS, PIM, and ERPs.

1980s and 1990s and the Shrinking Cost of Computers

The ultimate outcome of the decline in computer costs was sure to change the SaaS environment. Through the final decade of the 20th century and the beginning of the new millennium, a change occurred.

Computers were more affordable than they had ever been in the past. The employees were now able to muster the necessary funds to purchase a computer to have at their work station. Organizations no longer had to depend on time-sharing systems, in which several staff members shared one computer.

Nevertheless, the SaaS industry didn’t die out. Instead, it just adapted. The early SaaS systems featured the hub-and-spoke model, but that has been overtaken by the architecture of Local Area Networks (LANs) now. Applications on these internal systems were stored on individual devices, and essential business information was situated on a main server. Workers were linked to the LAN in order to gain access to these programs and information. This can be considered an early version of cloud computing.

How do you control the Local Area Network? Who manages it? Who assigns and restricts privileges to the network? Companies started to employ network administrators in order to guarantee efficient operation of the Local Area Network.

The supervisors had the duty of securing important enterprise data, looking after desktop hardware, installing and reinstalling upgraded hardware across the business, and bringing in fresh technology as it became available.

Larger companies began to have dedicated IT departments. Conversely, small- to mid-sized companies necessitated their network overseers to do a multitude of duties – such as teaching new hires how to work with the system.

In general, Local Area Networks in this time period were a great expenditure of resources. Not many companies had the ability to adeptly take care of the tasks related to running a Local Area Network.

Not all LAN managers had the necessary skills for their position, and many of them had not received proper instruction. Making the situation worse was that businesses infrequently had an idea of how much money or time they should allocate to a LAN manager. The result of this was that many LAN administrators found themselves with excessive workloads, getting paid too little and lacking the right tools to carry out their job properly.

Bloatware Leads to a Surge in Popularity of SaaS

We attribute a great deal of computer issues to bloatware. The rise of SaaS within the industry can be credited to bloated software, leading to its widespread acceptance.

Starting in the early 1990s, having individual computers in the workplace lessened the need for companies to use applications hosted in other locations.

By the mid-1990s, programmers had mastered utilizing this: packing lots of extra applications, commonly referred to as “bloatware,” into their software. When you downloaded a new program or operating system, it would come with additional applications that you did not necessarily require.

Today, we take bloatware for granted. It is presumed that a considerable number of fresh PCs have demonstration editions of antivirus software or extra programs included. In the middle of the 1990s, even something as simple as MS Paint was seen as superfluous software.

How did bloatware connect to SaaS? This software was taking up a lot of storage space on the hard drive. The amount of storage on hard drives was very limited during this time period. A 15MB hard drive was priced at $2495 USD. Computer users had all the necessary programs, but no place to store them.