There’s a lot of talk in the HR software and technology market in general about software-as-a-service (SaaS), all of which can be confusing unless you’re an expert on technology. Over the next few days, I will take a look at SaaS, as well as more traditional perpetual licensing to help you better understand the differences, and what is best for your organization.

Let’s start off by taking a look at what exactly SaaS is and where it fits within the market.

SaaS is defined as a software solution that is hosted and supported by a vendor as a service. Users access the service via the Internet, without the need to deploy and maintain an on-premise IT infrastructure. SaaS systems cannot be hosted on premise, they must be vendor hosted. SaaS is sometimes referred to as on-demand software.

The idea of SaaS is hardly a new one, with well-known players such as Salesforce.com and NetSuite delivering highly successful offerings. What is new is the term itself, and the attention this model is getting in the marketplace. By all accounts, SaaS will continue to grow in the coming years by about 10% per year and it is here to stay.

A SaaS model can be a cost effective option for organizations looking to avoid the larger upfront costs involved in the outright purchasing of a license. As well, since a SaaS model is always hosted, organizations can avoid adding servers, powering servers or setting aside space for them in a data center by utilizing a web-based system that users can access through a browser. Since the vendor supports the solution, the organization may not need staff dedicated to dealing with help-desk related issues.

In assessing whether or not to go with a SaaS option, it is important to keep in mind that no HR software solution is one size fits all. Organizations need to have the flexibility to choose the solution that is best for their particular situation. Depending on an organization’s IT environment, financial requirements and other factors, the total cost of ownership (TCO) can sometimes be higher with a SaaS model, especially over the long term.

Tomorrow, we’ll take a look at perpetual licensing.