InformationWeek SMB TechEncyclopedia

(Software-As-A-Service) Software that is rented rather than purchased. Instead of buying software and paying for periodic upgrades, SaaS is subscription based, and all upgrades are provided during the term of the subscription. When the subscription period expires, the software is no longer valid.

Ideal for Cloud Computing
SaaS can be implemented with local applications that expire after a certain time, but it is ideally suited for cloud computing in the Internet and Web browser-based applications, which can run in any desktop or mobile device, no matter the operating system. In this model, the applications are maintained in the service provider's datacenter, and every time users launch their browsers and log on, they get the latest version. In addition, the data can also be stored in the provider's datacenter.

     This approach has been touted as the wave of the future, many believing that local applications will be history down the road. However, legacy architectures tend to last longer than expected, and the road could be long. See cloud computing, Web application and ASP.