Is referring to the software that is centrally hosted and used remotely, commonly through a web browser, in exchange of a subscription. This way of licensing and providing software thrive in the cloud-computing era.
This model of delivering software to the users does not depend on distribution, (actually the first business plans for companies considering the commercialization of SaaS did not consider cost of partner remuneration into the pricing structure). Companies providing SaaS could have their hosts in one country and have users globally.
Is different from the licensing model (or the practically extinct, hardware model), where people buy software at a higher price at the beginning and then you have the option of keep paying the developer for support or upgrades.
SaaS are usually cheaper to obtain, but require periodical payments to maintain the license. In some cases the “freemium” model will apply, but often for a basic version of the software.
From the compatibility point of view, this model benefits the users in the way that every one will be using the same software; this at the same time allows collaboration.
Why any of this is important?
For a start, SaaS industry has estimated revenues of over 100 billion USD for this year (2016). A more detailed analysis in the following post of Forbes.
There are a number of implications for lawyers (consulting) and startups (developing) from the Tax, IP and Personal Data points of view that is necessary to address in order to provide a service that customers love and not perish in the effort.
This type of companies first has to deal with local regulations, complying with the national business laws, taxes and other industry legislation that may apply. But then, especially when attempting to scale the business, they will have to comply with international standards on consumer law, personal data treatment, double taxation and IP regulation over different markets.
Besides, In SaaS the main host and database can be in a different jurisdiction from the Company domicile, and the same could happen with the user, making relevant a cross-border operations review and strategy.
Another matter to have in mind is the great deal of analysis that has to be put on the Terms of Use and Privacy Policy of this type of Software.
Santiago Henriquez C., Lawyer
Picture: Jacob Aguilar-Friend (CC0)