What is ITIL?
The IT Infrastructure Library (ITIL ®)

comprises of a set of documents providing guidance on the quality provision of IT services,
used to aid the implementation of a framework for IT Service Management (ITSM).

ITIL, currently at version 3, was developed in the 1980's in the UK, under the auspices of the
Central Computer and Telecommunications Agency (CCTA) and is targeted for large IT shops
of government and enterprises.

ITIL was  widely adopted in the mid 1990s in the UK and then Europe and only received
acceptance in the US in the past few years.
(for more information, please read
ITIL in Wikipedia)
What is ITIL for SaaS?

A set of practices, templates and tools that have been adapted from the ITIL framework to the
specifics of the SaaS operations environment. They do not differ in principle, but have
different emphasis, understanding the realities of much smaller companies with a limited
budget and staff, catering to external, paying customers.
These practices have been shaped and  refined over the years in actual implementations at
SaaS companies with remarkable results.
Why ITIL for SaaS?

While the large enterprise IT shops have been adopting and implementing (at varying
degrees of success) the ITIL practices, their existence does not depend on improved service
operations. They have been functioning (usually quite poorly) for decades, and whether they
are more or less efficient, or have happy or frustrated customers, they will continue to be
around for many more decades.

SaaS companies, on the other hand, completely depend on the their customer satisfaction
and the efficiency of their service operations.

The SaaS model allows a relatively easy disengagement for customers, who will forgive you
for only so long until they seek an alternative solution, and there are many out there just dying
to get hold of your business.