What is Software as a Service?
Traditionally, you installed software on a computer and had to ensure that it was updated and backed up regularly. Software as a Service, or SaaS, is software that's hosted on the cloud that is accessed via a web browser.
What does it replace?
Lots of applications are available as SaaS. For example, online email services, like GMail and Hotmail, are SaaS. There are also accounting applications, document management, project collaboration - just about every software category you can think of has a SaaS equivalent.
What does it cost?
Costs vary widely. For example, accounting software providers Saasu and Xero offer annual subscriptions cost between $9 and $64 per month. Others, like GMail, offer a free service but deliver increased services for a fee.
There are lots of advantages of SaaS over traditional software. Updates are centrally managed by the vendor, the cost of entry is typically lower than traditional software and you get access to new features as they're released rather than having to wait for a new version to hit the stores.
The main gotcha is data lock-in. Once you start to use a SaaS software, you need to ensure that you can get your data out easily should you change your mind and want to change provider or go back to traditional software.
Also, do your research. As SaaS is still a nascent market there are lots of providers who haven't been around for long. Look for providers who have been around for a while and have a good reputation for reliability.
If you get the choice right, SaaS offers flexibility, minimal initial investment and access to constantly improving functionality without the complexity of managing complex software.