SaaS: taking the worry out of service.

• Author: Marshall, Jeffrey
• Position: Technology - Software as a Service

Lucent Technologies, the telecommunications equipment giant, outsources upward of 85 percent of its manufacturing to its contract manufacturers' 20-plus locations worldwide, along with its own integration centers. Needless to say, it's not easy to coordinate across different time zones and different vendors.

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So Lucent has contracted with Kinaxis, a software provider offering specialized coordination services for electronics manufacturing services (EMS), to integrate data from the manufacturing resource planning systems of those various contract manufacturers. Using Kinaxis' Rapid-Response, "Everyone can see what needs to happen and who needs to act," says Arvind Ballakur, senior manager, supply chain networks at Lucent. "The only way we can effectively manage our supply chain is through global visibility and close coordination with our partners."

Ottawa-based Kinaxis is offering its applications through a "Software as a Service" (SaaS) model, one of the hottest trends going in information technology. Customers like Lucent are no longer paying perpetual licenses, with the expectation of periodic patches and upgrades; instead, they are paying for the software usage through regular (often monthly) subscription fees, and the applications are available through the Web, not through their own IT systems.

In recent months, spurred by the widely reported success of salesforce.com's SaaS application, this new licensing model has been picking up converts like dry grass caught in a prairie fire. It's penetrated deeply in a number of niches, especially customer relationship management (CRM), human resources and logistics.

Its popularity is easy to understand. CFOs and CIOs love the idea that they don't have to deal with a major capital expenditure for a new software system, with the associated consulting and training time. Nor do they have to worry about maintenance. Instead, the software provider makes the application available around the clock and is responsible for everything related to operating it and ensuring its currency and viability.

The key characteristics of SaaS, according to analyst firm IDC, include:

* Network-based access to, and management of, commercially available software;

* Activities that are managed from central locations rather than at each customer's site, enabling customers to access applications remotely via the Web; and

* Application delivery that typically is closer to a one-to-many model (single instance, multi-tenant architecture) than to a one-to-one model, including architecture, pricing, partnering and management characteristics. With that, there is little or no opportunity for individual company customization.

SaaS is essentially an outgrowth of the application service provider (ASP) model that gained popularity a few years ago. With an ASP, a company essentially turned over its relevant function--payroll, procurement, etc.--to the software provider, which "hosted" the application on its servers and gave the company 24/7 access to the system.

SaaS represents a step up from ASPs, however, vendors say, because the...