Software as a Serivce (SaaS) provides software application vendors a Web based delivery model to serve big amount of clients with multi-tenancy based infrastructure and application sharing architecture so as to get great benefit from the economy of scale. Though SaaS application is usually developed with highly standardized software functionalities to serve as many clients as possible, many clients still ask for function variants according to their unique business needs through easy configuration and customization. Due to the subscription based model, SaaS vendors need take a well designed strategy to enable self serve configuration and customization by their customers without changing the SaaS application source code for any individual customer. In this paper, we will explore the configuration and customization issues and challenges to SaaS vendors, clarify the difference between configuration and customization. A competency model and a methodology framework have been developed to help SaaS vendors to plan and evaluate their capabilities and strategies for service configuration and customization.