Hosted software service refers to software that has been installed in an environment that is external to your organization and is designed to run on the service provider's server(s). As their customer, you are able to use the service for your defined purpose. Hosted software is similar to many other software products that you first download and install on your server, configure and maintain for optimum results. In the case of hosted service, however, you can use the software application without installing it on your server. You simply change the parameters using the software interface provided without being concerned about issues such as software maintenance and periodic upgradation.