The Needlessly Complex History of SaaS, Simplified
The Needlessly Complex History of SaaS, Simplified

When you delve into the history of modern technology, you often embark on a whirlwind journey through the ages, encountering antiques, innovations, failures, successes, bubbles, booms, and busts. The history of software is no exception, with its relatively short yet rich and exciting narrative, punctuated by peculiar developments that have paved the way for today’s software market. In this article, we’ll unravel the convoluted history of Software as a Service (SaaS), shedding light on its evolution from its obscure beginnings to its present ubiquity.

The Foundations of SaaS

Software as a Service is an integral part of our digital landscape today, but its origins are less apparent. The Department of Defense’s SaaS timeline may not look thrilling, but it gets the job done. In today’s world, SaaS is a ubiquitous presence. If you define SaaS as an application accessible through a web browser, managed and hosted by a third-party, then giants like Facebook, Snapchat, and Google, often perceived as mere ‘websites,’ fall under the SaaS umbrella. From a business perspective, SaaS not only enables customers to access software via the internet but also serves as a revenue model, commonly monetized through monthly subscription fees, as exemplified by Evernote and Dropbox.

A Glimpse into the Past: The 1960s

The SaaS journey may appear contemporary, but it has roots in the 1960s. During this era, IBM pioneered what could be considered a precursor to SaaS. The IBM 360 Model 67, introduced in 1965, marked a significant milestone. These computers, developed over the next decade, provided processing power to organizations like banks and government offices. To put their capabilities in perspective, the most advanced IBM 360 at the time, the Duplex, boasted a mere 2MB of RAM. Even in 1980, hard drive space was so expensive that a gigabyte cost nearly $200,000. This made it more cost-effective for organizations to rent processing power and storage space from dedicated providers. The service was referred to as time-sharing, a concept that laid the groundwork for SaaS by enabling data and processing to be hosted in separate locations.

The 1970s and 1980s: Pre-SaaS Architecture

While the 1970s saw the continued popularity of time-sharing, the personal computer market began to gain traction in the 1980s. Smaller and more powerful computers like the IBM PC made it financially viable for businesses to provide each employee with their computer and on-premises applications. During this period, the first Customer Relationship Management (CRM) software emerged, with ACT! as a notable example. These early SaaS solutions had text-based interfaces, focusing on storing contact details and enhancing sales efforts.

The 1990s: The Dot Com Boom

The 1990s witnessed a rapid increase in software complexity, outpacing hardware capabilities. Managing the systems and applications of employees’ personal computers became a logistical challenge. To circumvent this issue, businesses turned to an age-old solution—hosting data on remote servers, reminiscent of the 1960s time-sharing concept. This shift marked the rise of software provided on disks with licenses, accompanied by tech support and limited updates. While it offered a sense of security, it had its drawbacks, including restrictive contracts, pricing packages at the vendor’s discretion, and hefty upgrade charges. Notable SaaS pioneers like Intacct, NetSuite, and Salesforce emerged during this period.

The Rise and Fall of ASP

The rise of Application Service Providers (ASP) paralleled the development of SaaS. However, ASP had its inefficiencies, and it struggled to gain a foothold, especially in large businesses. The key differentiator between ASP and SaaS was self-service; ASP required vendors to set up users’ environments manually, while SaaS offered an automated approach. Ultimately, ASP faded into obscurity while SaaS continued to flourish, becoming the dominant model for software delivery.

Salesforce: The Pure SaaS Superstar

Salesforce stands out as a pioneering SaaS company that embraced the cloud delivery model right from its inception. Unlike its contemporaries, Salesforce avoided physical products and ASP infrastructure, delivering its application purely over the internet via web browsers. This bold move propelled Salesforce to become the most valuable SaaS company ever founded, with exponential growth.

SaaS Ubiquity in the 2010s

With Salesforce leading the way, SaaS had firmly established itself as a viable business model. Incumbents like Sage and Oracle were compelled to offer SaaS versions of their products to stay competitive. Startups recognized that the future of software lay in the cloud, not on disks with license keys. This transformation has made SaaS a thriving industry, with estimates projecting the enterprise SaaS market to be worth $50.8 billion by the end of 2018.

Blurring Lines and Commercialization

As we fast forward to the present, the distinction between SaaS and the internet itself has blurred. In an era where websites are considered SaaS products, the term’s definition has become increasingly challenging to pin down. JavaScript, powerful databases, and cost-efficient cloud hosting have empowered individuals and enterprises to develop and deploy SaaS solutions. The history of SaaS is merging into the broader narrative of the internet’s evolution, marking the end of a distinctive era while embracing the digital world’s grander history.


The history of SaaS is a testament to the ever-evolving nature of technology and its adaptability to the needs of businesses and consumers alike. From its humble beginnings in the 1960s to its pervasive presence today, SaaS has come a long way, reshaping the software landscape. As we move forward, it will be intriguing to see how the story of SaaS continues to unfold.

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