Tech Darwin Series — Evolution of SaaS

About this blog

I chose to write about evolution of SaaS in this blog for a reason. One important factor keeps coming up in most of our sales retrospective meetings. That is the nervousness or reluctance of law firms in moving their data to cloud. But this is hardly surprising. When I started my career two decades ago during the dot com boom, it was the same reluctance. However the businesses went for it and reaped the benefits out of it tremendously.

I thought a brief history of SaaS could be valuable information for lawfirms in their technology plans and also can help educate our acquisition team in their communication with lawfirms. Keeping in mind the wide range of readers from multiple background I consciously stayed away from being too technical in this blog. But please do excuse me if I had deviated unknowingly anywhere.


Any technology updation and advancement is closely tied to the economics of the time. SaaS is no exception. if we look back, the origin of SaaS goes back to the time of mainframes in 1960s. In this blog we will time travel to see how SaaS evolved from 1960s to what it is now.

Before that, let me brief on what SaaS is, for the readers who may not know. SaaS stands for ‘Software as a Service’ and it is mostly used interchangeably with cloud computing.

SaaS is a business model in which the software used by the user is hosted on a remote computer and accessed through internet ( mostly from browser). It provides significant cost saving for both users and makers which we will understand when we run through its evolution in this blog.


Super Expensive Mainframes

This is the era of mainframe computers. In those times computers were super big and super expensive.

“Two decades earlier, an IBM computer often cost as much as $9 million and required an air-conditioned quarter-acre of space and a staff of 60 people to keep it fully loaded with instructions.” — IBM Archives

It looked beyond the reach of even big companies (just forget about small firms and individuals then).

The industry worked around this situation by sharing a mighty computer with multiple people through a business model and architecture. It was the first version of SaaS. It was called as ‘time sharing/utility computing’ then.

In ‘time sharing’ model, the entire computing happens on the central mainframe which is connected via network to multiple dumb terminals (monitors attached with keyboards). User inputs are transferred from terminal to central mainframe and processed output back to terminal from mainframe via the network. the mainframe keeps an account on the usage of CPU, memory and disk by every customer and the accountant bills accordingly.

This model made the computing systems and programs affordable to small and medium business, education institutions and government offices.


PC Revolution

Welcome to the era of personal computers. Scientific break throughs in the field of electronics lead to computer on a chip called microprocessors. Parallel rapid advancements on solid state memory, digital display and many other components, triggered a revolution, getting the computers in to the hands of small-medium business and even individuals. This caused the death of mainframe and the time sharing model.

But SaaS didn’t die and it adapted leading to the evolution of LAN (Local Area Network) which is a closed network of a business entity in which all the computers of the business are connected. In the new system, applications are kept in individual computers and the critical business data needed for the applications are kept in a centralised server. Employees connected to LAN to access the business data from the applications. This is the early form of cloud computing.

However this model requires the businesses to maintain their network system (LAN). Upgrading the hardware, fixing any breaks, outages, security and more. A dedicated team of network engineers was needed thus spiking the operational cost.

On more unforeseen problem creeped in. Bloatware.

In 1990s developers bundled bloatware into their software as they kept taking advantage of the fact that individuals are having their own computers. So when a user installs a OS or software then, he gets a lot of software that he would never use. This is even more true today and we take it for granted.

However in 1990s hard disk space is premium. A 15MB drive costs $2500. With the mushrooming of bloatware, users have all software and sufficient computing power, but no disk space to have all these software.

Industry stared at the next set of problem. How to manage the storage.

1995 to 2005

Dot Com Revolution

Dot Com revolution in mid 90s and early 2000 made internet commonly available to business. For businesses running an expensive private LAN, this public global network was a boon. If they can keep their data and applications in an offsite server and make it available to their employee or customers through the cheaper internet, it would spiral down the IT cost of network and storage.

The technology industry evolved the SaaS model to serve the need and they termed it as ASP (Application Service Provider).

Businesses were initially nervous about letting third parties store their sensitive enterprise data and applications offsite. Many perceived security risks and stability of the startups coming up with ASP services.

However ASP thrived making it success for themselves and the businesses who migrated. In fact one important factor to success is ASP charged businesses through subscription licensing model, which is a big differentiator for businesses that had to invest big on one time setup fee before.

2005 to now

SaaS As We Have Now

ASP model was an important stepping stone in the evolution of the SaaS. However it ran into several troubles when tried to serve the ambitious industrial needs of simplified application deployment, easy upgradation, lower cost and fully remote applications.

The reason why ASP became unpopular was mainly technical. In ASP a business has to host separate instances (think it as a live box with all the features of your software inside) of application for each of its clients. Each instance has to be setup manually. With a business scaling rapidly, the instances should also scale rapidly.

imagine the upgradation scenario. Every instance has to be upgraded manually. Imagine the scenario, where different clients are in different versions and maintaining a catalogue of their versions and see which module is compatible to the client and which is not.. A typical upgradation headache.

Welcome to modern SaaS. No more different instances for different clients. One version for all users. With the ecosystem of PaaS, IaaS, one gets, auto deployment, a readily setup development factory for developers to develop their services and more.

There is a lot more to write on SaaS. But I am consciously trying to keep the technical details as little as possible for the wider reach of different sections of readers. I hope I will write another one covering the technical aspects of modern SaaS. Till then have a great time :)

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