Providing Software as a Service: a design decision(s) model

We examine how Software as a Service (SaaS) providers make different design decisions using a theoretical model. We consider two non-functional attributes: modularity of the software architecture and the architectural performance of the software. We model the relationship of these two attributes with factors such as user preferences, user demand, and the price of the service. In a significant departure from traditional models of IS product development, we considered marginal cost and maintenance cost of providing SaaS service to recognize that the SaaS service has characteristics of both a product and a service. We show how to find the optimal values of design attributes that maximize SaaS provider's profits, taking into account relevant factors such as user preferences, user demand and service price. Our research provides one of the first analytical models of optimal design decision making by SaaS providers. We use the model to further show how the SaaS providers should adjust the service design in response to changes in user preferences, associated costs and other relevant factors.