ASP vs SaaS Model: What's the Difference?

Software-as-a-service (SaaS) is frequently mistaken for an Application Service Provider (ASP). This leads to the misconception that SaaS is just a rebranding of ASP or that ASP is no longer relevant in today's market. However, these two models serve different purposes and have their own set of advantages.

How do you distinguish the two? It's a common struggle, as both solutions are "hosted" and used by businesses. On this page, we will delve into the concepts, clarifying what is ASP, how it differs from SaaS, and which one aligns best with your business needs.

What Is ASP in Business?

An ASP application service provider is a business model that delivers computer-based services to clients via the Internet or a private network, making it not strictly Internet-dependent. ASPs may be a great option for industries that require comprehensive software solutions, be they complex enterprise tools or highly specialized software. Yet, this generally entails a lengthy customization process, meaning it'll take a while to handle the tweaks before you can start using the solution.

Application service providers often focus on hosting specific applications. Typically, traditional ASPs utilize a single-tenant architecture, which means that users are required to install a lightweight client application on their devices if they want to use the solution. Even though access may be gained via web browsers, the ASP is generally in control of the application and its operating environment.

The costs for ASP services are flexible and are usually adaptable. Yet, compared with SaaS, ASP prices are often much higher.

Fair enough, the ASP model has been visibly eclipsed by SaaS in terms of adoption and popularity. Nonetheless, some niche sectors and specialized fields still utilize this model. Zendesk (customer support), ADP (payroll and HR services), and NetSuite (CRM and ERP solutions) are a few prominent examples.

Types of ASPs

There are several commonly recognized subcategories of ASPs, including:

• Enterprise ASPs (deliver sophisticated business applications as well as comprehensive solutions to meet diverse enterprise needs);
• Specialist ASPs (focus on addressing specific business requirements such as credit card payment processing or human resources management);
• Regional/Local ASPs (cater to the needs of businesses, often small ones, within a defined locality or geographic area);
• Volume Business ASPs (provide cost-effective, prepackaged application services similar to what the popular payment gateway PayPal does);‍
• Vertical Market ASPs (operate within particular industries to serve specific customer profiles, say, those in the dental healthcare sector).

Advantages of ASPs

Here are some of the ASP pros worth taking note of:

• Can provide tailored solutions that cater to sophisticated business needs that aren't available in "mass-market" SaaS solutions. Hence, businesses can get a hold of specialized software that's designed specifically for their operations.
• Application service providers often deliver specialized services, implying expert oversight and narrowly focused customer support.
• At times, this path also entails a higher level of customization and more control on the user's side over the software.

Disadvantages of ASPs

But there are visible downsides too. These are a few ASP cons:

• Exclusivity, if we can put it in these words, generally comes at a price. An ASP can be very costly, meaning not all businesses or startup budgets can afford them.
• Customization can mean time-consuming setup and implementation (if we compare ASP to SaaS).
• A reliable Internet connection is still crucial for ASPs even if they aren't web-hosed, as it's integral for smooth, non-disrupted communication.
• ASP solution integration with existing business systems is often a challenge, with compatibility issues being a common scenario.
• Scalability is also ordinarily not their strong suit, meaning it could be tough to grow and expand.

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SaaS

Also referred to as web-based, on-demand, or hosted software, software-as-a-service represents a modern model of delivering applications using the Internet. This means that people can access the software directly through a web browser. SaaS apps typically operate on the servers owned by the provider and are cloud-based, which are both important points to know about SaaS application development.

Have you ever used Google Docs, Gmail, Trello, Figma, or Calendly? These are all SaaS available online. They usually have multi-tenant architecture which means that everyone uses the same version of the solution. Most of them opt for the subscription pricing strategy. It's highly convenient, as once you pay for your package, you get the chance to use what you've purchased practically straight away.

And you don't have to install or constantly update it on your devices, as the provider takes charge of maintaining and upgrading the applications. All you need is access and Internet connectivity.

Common Types of SaaS

SaaS solutions are all over the place and they can applied almost anywhere. Here are some product SaaS types that are common:

• CRMs (customer relationship management software like Pipedrive, HubSpot, or Salesforce);
• Collaboration platforms (like Discord, Google Meet, Slack, and Flock);
• Project management tools (like Basecamp, Wrike, and ClickUp);
• ERP systems (enterprise resource planning solutions like Odoo or Microsoft Dynamics 365);
• E-commerce platforms (Shopify and BigCommerce are examples);
• Marketing and analytics tools (like Mailchimp, Mixpanel or Amplitude);
• Accounting software (such as Freshbooks or Xero);
• and lots of others.

Advantages of SaaS

What makes the software-as-a-service model outshine ASPs in many ways? Here are a few SaaS pros:

• The initial costs for getting SaaS are generally low (if compared to ASP).
• Fast access to the solution right after making a payment or getting a subscription. To streamline this process, you can learn about payment gateways that ensure secure and efficient transactions.
• Hassle-free maintenance is very alluring, as all the upkeep is the vendor's responsibility.
• All users have the same shared software version and get upgrades or new features as part of their subscription automatically when the vendor rolls them out.
• As a rule, it's easy to scale your usage up or down and make adjustments thanks to the flexible nature of SaaS offerings.
• Since the software is hosted in the cloud, compatibility issues are a rare thing.

Disadvantages of SaaS

What are the downsides of the software-as-a-service model if we put it on the same scale as ASPs?

• The Internet connection must be stable to use the service or product, and server traffic or other external factors can impact performance.
• Although cheap at the outset, ongoing subscription fees and upgrades can add up, but it may be hard to switch providers or transition to something else if you have a long "relationship" and are accustomed to a service that has become costly.
• Since SaaS is somewhat built as a one-size-fits-all solution, there may be a limit when it comes to customization or certain configurations, which may be considered one of the SaaS challenges.
• There's little control on the user's side over the environment, infrastructure, data security, and so on.

Comparing ASP vs SaaS

What lies at the heart of the biggest SaaS and ASP distinctions? It's safe to say that the fundamental difference is in their approaches, methodologies, and audiences they aim to serve. Let's take a closer look and compare them side by side. The table below marks the major takeaways on how ASP and SaaS differ from each other.

SaaS vs ASP: Which to Choose?

Hopefully, the SaaS ASP comparison above dotted a few i's. But is there a way to choose between them? And, more importantly, should you?

Application service providers are somewhat closer to old-school legacy software than SaaS and share more similarities with it. Essentially, we can say that SaaS builds upon the foundational concept of ASPs. This explains why many ASP providers are transitioning to the SaaS model whose popularity and broad adoption are continuing to increase. But not all of them are making the transformation.

When Should You Choose ASPs?

If you're seeking specialized software with a high level of personalization or something really sophisticated that's not available via SaaS. We can think of an ASP as renting a big workshop or barn, where you have the freedom to sculpt whatever you need to fit your business objectives and individual needs.

But all the installations and most of the maintenance for what you've created is on you. The ASP model and a high degree of customization go hand in hand, therefore, such services may come at a costly premium and involve longer setup times. The operations generally happen over a network.

When Should You Choose SaaS?

To get a cloud-based solution that you can access quickly and modify. It's like signing up for a fitness club, and your membership gives you a pass to the facilities within the space. What you use and don't use is up to you, but you'll always feel secure that the equipment is well-kept, clean, and safe. Everything is taken care of for you as long as you pay for your subscription, and the upfront costs are usually low.

Accessibility is simple, via the Internet as SaaS is cloud-based. But SaaS is a universal thing, created to suit a wide array of needs, hence, there's a chance a user may hit a wall if some unique things aren't thought through or provided by the vendor.

Final Thoughts on Application Service Providers and SaaS

At their core, SaaS and ASP utilize different approaches to delivering software. ASPs have been around for longer and have an extensive history, they've given rise to more specialized categories, including SaaS and its "relatives" like PaaS (pllatform-as-a-service) or IaaS (infrastructure-as-a-service).

In our ASP SaaS comparison, we've explained that software-as-a-service is currently the dominant approach for cloud-based software solutions. It attracts those using such solutions with its ease of use, simple accessibility, minimal maintenance, and a clear pricing model.

If you're planning to build a solution of your own and need a hand, Upsilon's experienced team provides SaaS application development services. We'll be glad to share our expertise and make a quality product together, so feel free to contact us to share the ideas you have in mind!

FAQ

1. What does ASP stand for in business?

The ASP meaning in business refers to an application service provider, a model that implies software delivery using a network. The approach has been around since the 1990s and is evolving with the rise of cloud computing.

2. How does an applications service provider differ from software-as-a-service providers?

Although both provide software, SaaS is a cloud-based solution that's noted for its user-friendliness, scalability, and more streamlined availability after purchasing the subscription. ASPs are viewed as more traditional, often imply a lot more time for setup and configuration, and cater to more sophisticated business requirements.

3. Is an ASP the same as SaaS?

No, it's not. It can be said that SaaS is a more modern evolution of the ASP software delivery model. SaaS is typically designed to be used by a broad audience, while a solution delivered by an application service provider is more focused on tailoring unique solutions, say, that aren't available out of the box by SaaS.

4. Are ASPs a thing of the past?

It is considered that ASPs laid the foundation and groundwork for the development of cloud-hosted SaaS, which is overshadowing ASPs and getting wider adoption, yet some niche products still use the model to date.