Some basic differences
While people in the IT industry may enjoy debating about whether SaaS and cloud computing are different, most corporate decision-makers view them as sharing similar attributes and offering similar business benefits. According to Gartner, cloud computing is not just a buzzword; it does have a distinct meaning separate from SaaS.
Before we pull them apart we should start off with a couple of basic definitions of both SaaS and cloud computing:
"Software-as-a-Service is about delivering applications as a service over the Internet in a pay-as-you-go model. There are SaaS leaders across multiple categories of applications, including Customer Relationship Management (salesforce.com, Oracle),and many more. Research analysts had estimated the size of the SaaS market to be between $12-14 billion by 2010.
"Cloud Computing, on the other hand, is about delivering both applications and infrastructure as a service. Cloud Computing is now generally defined in terms of three layers: application, platform, and infrastructure. SaaS has evolved to become the application layer of Cloud Computing; the platform layer consists of providers such as Force.com, Microsoft Azure, Google App Engine, among others, that deliver a hosted platform and tools to build, run, and manage your applications in their cloud environment; the infrastructure layer consists of providers, including Amazon Web Services, IBM, Opsource, and others, that provide a hosted infrastructure to run and manage any cloud application you develop in a public or private cloud and pay for it based on an elastic pricing model (unlike the traditional managed service providers). The Cloud Computing market is estimated to be anywhere from $60 billion to $165 billion over the next few years."
Whereas cloud computing has more potential for mass customization than SaaS, cloud computing does not particularly compete directly with SaaS. Amazon AWS and Force.com are unlikely to be in competition with each other because they segment the market into the high-end and low-end of mass customization respectively, and customers choose one or the other according to their needs.
However, both compete against on-premise software, offering many of the same benefits such as mass customization. But unlike SaaS, cloud computing does not compete head-to-head for final end-user applications. Competition exists for components at each layer of the technology stack - from storage to user interface. As a consequence, they compete on architecture as much as they do on outsourcing. While SaaS adoption is usually driven by functional executives, cloud computing adoption is normally driven by IT executives.
Another interesting take is that of Brenda Michelson of Elemental Links, Inc. She created the “cloud-o-gram” diagram, her interpretation of the cloud computing space. Her cloud-o-gram has four inter-related areas: cloud computing offerings, cloud computing environment, cloud computing environment offerings and customer-provider agreements. There are five categories of cloud computing offerings: “for the cloud”, “about the cloud”, “on the cloud”, “of the cloud”, as well as the cloud computing environment itself. SaaS is an offering on the cloud. IaaS and PaaS are offerings of the cloud.
The salient difference between SaaS and cloud computing is that SaaS has largely been about Internet applications used by people, whereas cloud computing is about Internet application components used by other computers. You could look at it as Websites vs. Web Services. SaaS is a fully formed end-user application that is not located on your premises, whereas cloud is computing infrastructure and services that you can rent.
Gartner offer a tutorial for understanding the relationship between SaaS and cloud computing. You can use this research to understand cloud computing and its impact on SaaS providers.
What do you think? Can you think of any more differences between the two? Your opinions are welcome!