"The attractiveness of the SaaS model for the customer is that it can significantly reduce the user's up-front investment in software, computer processing, and storage. It also allows the supplier to offer competitive pricing by leveraging its economies of scale," according to an International Trade Administration report. SaaS has been driven in recent years by significant technological advances, notably faster broadband networks, so-called Web 2.0 innovations, improved security technologies and data centers that have virtualized computing and storage resources, the report said.

The document states that concerns about data security and privacy overseas have emerged as potential trade barriers for U.S. SaaS firms. "Vendors have come up against restrictions on trans border data flows in Asia that ban off-shoring of any banking and telecommunications data processing and, as a result, adversely affect their SaaS sales," the paper stated. They have faced resistance in Canada and Europe as well as from some agencies, governments and businesses that are concerned about data confidentiality and the risk that U.S. intelligence organizations could access sensitive information at will.