A contractual arrangement where a provider licenses software to customers on a subscription basis. This model eliminates the need for users to install and manage the software locally; instead, access is granted over the internet. A practical illustration involves a company utilizing a cloud-based customer relationship management (CRM) system to manage its sales and customer service activities.
This type of agreement offers numerous advantages, including reduced upfront costs, scalability, and simplified maintenance for the user. The provider handles all aspects of infrastructure, software updates, and security. Historically, this delivery method has evolved due to advancements in internet technology and the increasing demand for flexible and cost-effective software solutions.