Confusion reigns over whether hosted or software as a service (SaaS) is the better choice for that next software overhaul. It doesn't help that so many hosted vendors are touting their wares as SaaS or Cloud. Of course, there's a reason for the blurring of label lines – SaaS is on an upswing in most markets. Put another way: everyone has their heads in the Cloud these days. 

"According to a research survey conducted by Kelton Research, more than half of respondents reported that they are currently using SaaS applications," says Larry Beck, senior director of Cloud Strategy at Avanade. "In the United States, this number increases to 68 percent."

The more telling number, however, is not how many companies jumped on the Cloud, but how many decided to stay there. A recent Gartner survey found more than 95 percent of organizations expect to maintain or grow their use of software as a service (SaaS). Survey respondents cited significant integration requirements and a change in sourcing strategy as the top two reasons for adoption followed by high total cost of ownership (TCO) of other software options.

Trend or Spin
"SaaS applications clearly are no longer seen as a new deployment model by our survey base, with almost half of those surveyed affirming use of SaaS applications in their business for more than three years," said Sharon Mertz, research director at Gartner. "The varying levels of maturity within the user base suggest growing opportunities for service providers along the adoption curve, as organizations seek assistance with initiatives ranging from process redesign to implementation to integration services."

Survey after survey is coming to the same conclusion in every business category. An April 2010 survey, conducted jointly by Plateau Systems and Saugatuck Technology, found that even human resource (HR) executives are "quickly moving to SaaS and Cloud-based solutions to meet their key business challenges and as a means of closing the effectiveness gaps that currently exist between HR priorities and HR systems."

This all begs the question of whether this massive migration shows an actual trend or just a successful marketing spin.

In the case of EDI implementations, at least, the reasons are concrete. "Broader Infrastructure-as-a-Service (IaaS) and Platform-as-a-Service (PaaS) solutions are permitting companies to support and evolve their EDI services more quickly and cost effectively," says Jeffrey M. Kaplan, managing director of THINKstrategies.

EDI Cloud Plays
Companies rely on EDI to exchange critical and time-sensitive business documents such as purchase orders, material releases, invoices, and shipping notices. This leaves little time for slow implementations and cranky upgrades.

"As supply chains grow in scope and complexity, EDI departments are finding it difficult to keep pace with growing technology and personnel requirements," says Rich Stanbaugh, president and CEO, ANXeBusiness. "Many companies facing these technology and personnel constraints are electing to outsource their EDI operations to an EDI managed services provider."

The need for speed and lower costs can leave a company vulnerable to a vendor touting hosted as SaaS, however. "Customer preferences vary based on their level of awareness regarding the difference between the two models," says Kaplan.

So how can you tell hosted from SaaS?
"Remote hosted solutions involve the vendor assuming responsibility of managing specific instances of their software on behalf of individual customers," says Kaplan. "SaaS entails a multi-tenant approach in which all of the customers share the same software capabilities and common support mechanisms."

"While the remote hosted approach gives the customer more individualized support and permits greater customization, it makes adopting ongoing updates and upgrades more difficult and doesn't permit the customer to leverage the latest innovations, economies or common benchmark metrics of a SaaS model," he explains.

Newest to the scene are hybrid models which couple the advantages of both. Generally speaking, the hybrid models are popular in companies that must comply with data privacy regulations.

"It is important for companies to base their decision for SaaS and/or hosting on their strategic business objectives," says Beck. "Failure to do so – and to property vet them – leads to implementations that lack the necessary element of success."