Based on Scott's entry, here is how I boil down the problems with licensed software that SaaS solves for customers:
- Deployment time and expense. When a new version of the software comes out, it can take considerable time and money to roll the software out, especially in an enterprise environment. With SaaS, upgrades require little or no deployment time or expense for the customer.
- Administration time and expense. Typically, when software is installed at an enterprise site, administrators monitor and manage the installation to ensure it is functioning properly. With SaaS, the provider handles site administration.
- Lack of accessibility. If the software is installed locally on individual computers, and a customer needs to use software when she is traveling, she must bring a computer with the software installed or rely on installation on other computers. With SaaS, the service is available remotely via the web or another mechanism.
UPDATE: Paul Young has some additional thoughts.