Explaining Software as a Service Outsourcing: Economic and Social Considerations

Software as a service (SaaS) offers an innovative way to deliver software over the Internet to distributed organizations. While more and more SaaS providers are joining the market and competition among providers becomes more intense, we need to understand the considerations of potential clients. Built on transaction cost theory and social exchange theory, this study empirically investigates, with a national survey of IT/IS executives, the role of economic factors and the impact of social relationships on the economic factors in firms’ deciding to adopt SaaS. We found that cost savings are a critical consideration in SaaS and that social relationships exert a strong, positive direct impact on cost savings and positively moderate the impact of cost savings on SaaS. This paper expands our theoretical understanding of the SaaS phenomenon and provides some managerial insights