Software as a Service is one of the big trends in software today. Just ask the analysts:

• Gartner predicts SaaS revenue to reach $16B by 2013
• IDC predicted 40% growth of SaaS in 2009 because of the economic downturn (zero capex, pay-by-the-drink pricing)

Anyway you slice it, SaaS is a big opportunity. As the SaaS market explodes, some software companies find themselves scrambling to figure out how to ride the wave. Many ISVs, facing declining margins and competitive price pressure from SaaS pure-plays, are thinking they need to make the shift. But the transition from packaged software to SaaS is fraught with complex architectural, delivery and support considerations that are very different than a traditional license business model. If you are planning to adopt a SaaS model, consider the following before plowing ahead:

1. Be clear on the business drivers. What are the specific results you are trying to achieve? Beat back the competition? Increase margins? All the other kids are doing it? Once you define your business objectives you can align your architectural and personnel decisions with them.
2. Recognize the architectural trade-offs in performance v. time to market. SaaS or On Demand means different things to different people. Is the application just accessible over the web, multi-instance, or truly multi-tenant? Your choices will significantly impact customer experience, the leverage you get from your infrastructure and the support structure you?ll need to put in place.
3. Understand the impact on your organization. The delivery and support organization needed for a SaaS model is very different. You have operational issues to manage SLAs for network and application uptime and responsibility for maintaining customer data. In what ways will your organization need to adapt?
4. Be explicit about how you intend to execute. Michael Lombardi from the National Football Post has a great saying: “Don’t confuse hope for a plan”.  Developing your new SaaS product requires you to make R&D resource allocation decisions to ramp up the new offering that could impact support for current customers.  Do you have a clear set of priorities to work from?  Do you have a plan on how you’re going to support the customers who are providing you with current revenue?  How quickly do you want your current customers to adopt your on-demand platform and what incentives are you going to give them to get them to move on your schedule…without them explicitly knowing it?  How do you manage this dual development path without blowing your budget?

SaaS represents tremendous promise. A well thought out transition plan and effective execution will ensure that you capitalize on this important trend.