Ahmar Abbas, VP Slashsupport has a nice article up at ITWorld on the SaaS business. He details the challenges that SaaS vendors face as service and not software providers:

24 x 7 x 365 Operational Monitoring and Management
The entire technology stack, which includes servers, storage systems, databases and applications, has to be monitored on a 24 x 7 basis.

Infrastructure Resiliency, Performance and Capacity Management Planning
The delivery infrastructure has to be developed so that it is free of single points of failure. In many cases, this requires deploying clustered systems (databases, servers, etc.) that add to the complexity of the managed systems.

Disaster recovery and Business Continuity
A technology infrastructure disaster recovery plan has to be developed and implemented.

Data Protection
The technology infrastructure and processes have to take into account the fact that the systems contain very valuable and sensitive customer information.

Technical Support
The technical support staff at a SaaS vendor must not only provide product focused support, but must also address any system accessibility problems.

You can read the full article here

To add to this a point that came up during discussion with SAP during SAPPHIRE06 is the single/multi tenant model,some vendors are like SAP are moving forward on a multi tenant model which might increase significantly both the cost and complexity in management.

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Prashanth Rai