As many small and medium-sized organizations looked for additional ways to control cost, modernize strategy, and consume on-demand solutions, software licensing became a very complicated issue. An example of this is Oracle, a company that was a bit late to the cloud licensing game. New server configurations were much more substantial with more sockets, more cores, and more RAM. Even with no change in utilization or software configuration, Oracle client charges increased to over a million dollars due to new server sizing. This affected strategy, economics, and eventually technical decisions on how to move forward in the face of shattered budgets and ROI calculations.

Many organizations lack the skills or resources to create custom software applications. Freeware and opensource software helped some organizations, but they still required skills sets and significant adjustment for adoption. Software providers are starting looking for ways to offer online cloud-based solutions at lower cost and universal access. These new models would center around new licensing models tied to multiple users, a certain level of access, and SLAs rather than the size of the software infrastructure deployment.

With SaaS, the subscriber uses the provider's centralized application deployed using cloud infrastructure. SaaS enables access from any approved client device, browser, or custom interface. The user/subscriber does not have access to the underlying infrastructure, application code, or individual application attributes except for a set of named user-specific application configuration settings.

In the SaaS space, some applications have stabilized/normalized meaning they are widely adopted and have significant competition and innovation driving licensing costs downward, for example, office suites, collaboration software, and communications software. Software-as-a-Service providers offer a complete software application to customers using a license-based model that accesses the application on-demand via a self-service interface.