Instead of buying a piece of software and then installing it on your company’s computers, Software as Service (Wikipedia definition) vendors rent their application, typically on a per-user basis, and you access it over the internet.

In some ways, it is the paid-for equivalent of the free online services we use every day such. It relies on the same types of data centres, scalability, multi-tenancy and web technology.

Notable examples of Software as a Service (SaaS) include Salesforce.com (customer relationship management), NetSuite (enterprise resource planning) and MessageLabs (internet security).

The new McKinsey report (hat tip Nicholas Carr) suggests that:

• 31 percent of respondents (enterprise software customers) thought that SaaS was the most important trend impacting their business. Web services and SOA came in second with 25 percent and they touch on the same kinds of issues, but with the data centre kept in house.
• Today, they allocate 19 percent of their total software spend to subscription/on demand software. The proportion was higher in small companies. Software as a whole accounted for 32 percent of companies’ IT spend.
• 74 percent were favourably disposed to adopting SaaS.

What do you think? Do you use SaaS? Would you replace an existing program with a SaaS platform?