Software as a Service Myths?

BusinessWeek has an interesting article on Software as a Service. The article explores 7 myths about Utility Computing. One of the Myths is:

SaaS is just another version of the failed application service provider, or ASP, and hosting models of the past, and will suffer the same fate as its predecessors.

I agree with the author, this is a myth. Though my reasons are a bit different. ASP's had trouble in the past because:

• Technology was not mature enough to deliver applications as utilities.
  
  
• Pricing models hid the value of the utility.
  
  
• ASPs sold against their natural partners.
  
  
• ASP solutions are technically oriented and horizontally priced.

Contrast this with Salesforce.com. Internet technology is mature enough to provide their software as a service. Unlike traditional ASPs, they are not selling bits and bytes, their pricing model connects to the users in their terms . Their solution is business focused and vertically priced, the price connects directly to the benefit the customer derives in using the service.

There is a distinction between providing compute resources like a traditional ASP and providing Software as a Service. Similar to the distinction between electricity as a utility and a toaster being a toasting utility. It is this distinction horizontal vs vertical solution orientation that really differentiates the SaaS models from the ASP models.