ASP vs SaaS: Understanding The Right Software Model For You

In the realm of software delivery models, the choices that businesses make can significantly impact their operations, efficiency, and scalability. Two prominent models, application service provider and software as a service, represent distinct approaches to delivering software applications.

In this article, we will explore and compare ASP vs SaaS, shedding light on their definitions, delivery methods, limitations, and other aspects. 

ASP vs SaaS: Understanding The Right Software Model For You

Understanding an application service provider

Emerged in the late 1990s, an application service provider (ASP) refers to a model where a provider hosts and manages software applications and makes them available for the customers through the Internet or a private network. We can say that it’s a way for businesses to outsource their software needs without buying and managing the hardware themselves. It’s commonly used in industries needing sophisticated software solutions.

ASP services can range from simple applications like email and document editing to more complex enterprise-level solutions such as customer relationship management (CRM) or enterprise resource planning (ERP) systems. 

ASPs can be categorized based on their primary functionality and the services they offer. There are:

  • Enterprise ASP: focus on providing comprehensive solutions for large organizations, offering scalability and customization to meet specific business requirements;
  • Local/regional providers: serve businesses within a specific geographical area, offering localized support and services tailored to the needs of that particular market;
  • Specialist ASP: provide specific services tailored to meet the needs of a particular industry, for example EHR systems for healthcare.
  • Volume business ASP: target small and medium-sized enterprises, offering cost-effective, standardized solutions that can be easily deployed and managed;
  • Vertical market providers: concentrate on serving businesses operating within a specific industry or vertical market, such as manufacturing, retail, etc. 

In the ASP model, the software is typically created and owned by third-party independent software vendors (ISV). ASPs specialize in hosting and managing the software developed by these external vendors. Basically, the ASP customer purchases the software and pays a provider to host and maintain it. Thus, the person installing the software might not have all the knowledge about it, which can make things less efficient and slow when solving problems. 

Traditional ASPs use a single-tenant architecture and may need users to install a lightweight client application on their computers for access. As for the payment, ASP involves a subscription-based or pay-as-you-go model. In other words, businesses pay a regular subscription fee to the service provider for accessing and using the hosted software services. The ASP distributed software is usually purchased over a long term with larger billing cycles.

Some ASPs may implement usage-based charges, where the cost is determined by the volume of usage, such as the number of users, transactions, or data storage. Besides, depending on the ASP, there might be initial implementation or setup costs as well. 

Overall, ASPs can provide many things, such as:

  • Software hosting and management;
  • Platform as a service (PaaS);
  • Outsource servers, storage, and networking components;
  • Technical support and maintenance;
  • Updates and upgrades;
  • Customization and integration.

Application service providers can easily adjust their services to meet the changing needs of their clients, whether it’s about the number of users or resources. ASPs might let you choose where your data is stored, allowing you to decide whether to keep it in your business location’s jurisdiction or where the host’s servers are. To make a decision, you should consider factors such as data protection laws, compliance regulations, and your company’s policies.

Understanding software as a service

SaaS, or software as a service, represents a modern software delivery model where the software and associated data are centrally hosted in the cloud. In contrast to ASP, which can require software installation on users’ PCs, SaaS relies entirely on the web and can be accessed through a web browser. One of the primary advantages of SaaS is its accessibility and cross-platform compatibility. It also extends the concept of the ASP model, as SaaS vendors typically develop and manage their own software, instead of using third-party vendors.

SaaS uses a multi-tenant architecture. This means that multiple customers share the same instance of the software. ASPs, on the other hand, often involve single tenancy, which means that each customer has their own instance of the software. 

As for the cost, the payment is on subscription or pay-as-you-use basis. Besides, SaaS solutions often have a free trial period or free subscription with limited functionality. 

There are a lot of available SaaS solutions that cover functionalities from business operations and collaboration to specific industry needs. For example, Salesforce and HubSpot CRMs, Google Workspace, Trello and Shopify. 

ASP vs SaaS: key differences

There is a common belief that the SaaS model is simply a rebranded version of ASP. Some argue that ASP is merely an outdated label for SaaS. In reality, these are two distinct business models utilized for different objectives.

ASP is similar to renting a house. It allows you to fully customize the software and the environment where it’s hosted. You have the flexibility to tailor everything to your specific needs.

With SaaS, it’s more like having a membership to a gym. You have access to all the equipment and facilities without having to worry about maintenance, cleaning, or space. It’s all managed for you. You simply pay for the membership and use the services.

Thus, when comparing SaaS vs ASP, several factors come into play, influencing their suitability for different use cases and organizational needs. Let’s take a closer look at some of the key differences between those two models.


As we already mentioned, ASPs typically involve hosting and managing software applications on behalf of clients, often requiring installation on users’ PCs. It operates on a client-server model with a focus on individualized instances.

On the other side, SaaS employs a centralized model where the software is hosted in the cloud and is accessed over the Internet. It follows a multi-tenant architecture, allowing multiple users to share the same instance of the software.

Ownership and maintenance

One of the primary distinctions between SaaS vs ASP is the ownership and maintenance of the software. In the SaaS model, the provider retains ownership of the software and is responsible for its maintenance, updates, and security. In contrast, ASP may involve the customer owning the software licenses, with the provider managing the infrastructure and maintenance.

Cost structure

SaaS typically operates on a subscription-based model, where users pay a recurring fee for access to the software. This can be advantageous for businesses as it spreads the cost over time and may include updates and support. ASP, on the other hand, may involve upfront costs for software licenses and hardware, with ongoing maintenance and support fees.

Accessibility and scalability

Accessibility and scalability are essential features of SaaS solutions. SaaS makes it easy to access applications from anywhere with an Internet connection, which is great for remote work. It’s also designed to scale, so businesses can adjust how much they use based on what they need. Comparing ASP vs SaaS, ASP solutions might offer similar benefits, but their infrastructure setup can impact accessibility from diverse locations and adaptability to evolving requirements.

Data storage

In the ASP model, data storage and management typically reside on the customer’s premises or in a third-party data center. This means that the customer is responsible for the security, maintenance, and backup of their data. When comparing SaaS vs ASP, it’s important to note that SaaS solutions frequently employ cloud-based data storage, where the provider takes charge of data security, redundancy, and disaster recovery. This significant distinction can have implications for data privacy, compliance, and overall risk management.

Application service provider vs SaaS: challenges and limitations

Both ASP and SaaS models have their own issues and limitations. These range from concerns about data security and customization to problems related to network dependency and integration complexities. Businesses should carefully assess their specific requirements and weigh these challenges against the benefits of each model before making a decision.

Therefore, let’s first consider some of the problems you may encounter when using each of the models.

First off, ASP:

  • Dependency on network quality. In ASP, even though the software isn’t web-based, a good internet connection is necessary for smooth communication with the hosted applications. If the internet is slow or unreliable, users might face disruptions accessing applications.
  • Customization challenges. Some ASPs offer limited customization options, making it challenging for businesses with unique requirements to tailor applications to their specific needs.
  • Potential integration issues. Integrating ASP-hosted applications with existing systems can be complex, and compatibility issues may arise when trying to connect with other software or services.

As for the SaaS model, the challenges can be the following:

  • Limited control over infrastructure. Users have minimal control over the underlying infrastructure in SaaS models, which can be a limitation for businesses requiring specific configurations or advanced customization.
  • Internet dependency. SaaS applications require a reliable internet connection. Users may face challenges if they operate in areas with poor connectivity or experience internet outages.
  • Vendor lock-in. Adopting SaaS solutions can lead to vendor lock-in, making it challenging to switch providers due to data format differences and dependencies on the specific SaaS provider’s ecosystem.

However, there are also some issues that are common for ASP and SaaS models:

  • Compliance and legal issues. Adhering to data protection and privacy regulations is a shared challenge. Both ASPs and SaaS providers must navigate compliance issues to ensure that their services meet legal requirements.
  • Transition and integration challenges. Migrating existing systems to ASP or SaaS models and ensuring smooth integration with other tools can be complex and may pose challenges during the transition phase.
  • Cost considerations. While ASP and SaaS models can offer cost savings, they may also incur unexpected costs, such as fees for additional features or increased usage.

SaaS vs ASP: comparison

Let’s break down the comparison of ASP vs SaaS to give you a comprehensive view of each model.

DeploymentHosting and managing for individual clientsCentralized hosting in the cloud
AccessibilityMay require dedicated software installationsAccessible via web browsers
ScalabilityScaling may involve setting up new instancesInherently scalable, shared infrastructure
Maintenance and updatesClients may be responsible for maintenanceManaged entirely by providers
Resource allocationIndividually for each clientShared among multiple users


In simple terms, ASP and SaaS are different in how they deliver software. ASP, with a broader history, covered various internet services including software, but has evolved into more specific categories like SaaS, IaaS (infrastructure as a service), and PaaS (platform as a service). In contrast, SaaS is a modern term specifically focusing on delivering software over the internet through a subscription model. SaaS is now the more common approach for cloud-based software. Its ease of access, minimal maintenance, and predictable costs make it an attractive option for many organizations.

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