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The defining characteristic of software-as-a-service is that customers pay a monthly subscription fee to access the hosted application, rather than paying a one-time perpetual license fee to own the product. When customers pay to access a hosted application, the vendor is responsible for server maintenance, updates and availability. In contrast, when customers pay to purchase an application, they must provide the hardware (servers), maintenance and perform upgrades independently.
In essence, companies that subscribe to SaaS services are paying a monthly subscription fee to have a third-party organization manage IT infrastructure. The SaaS software delivery model helps to reduce the cost and time to deploy a new piece of software, creates increased certainty around annual cost-of-ownership for software, reduces costs, and outsources labor tasks that would otherwise have to be performed in-house.