Photo by Meredith Cook at Breckenridge, CO on a “blue bird” day, a clear day following a fresh snowfall.  It’s unrelated to SaaS or Cloud (or is it?); just nice to look at.

SaaS and cloud are starting to be used interchangeably (“we’re looking for a cloud solution”) but they really are not the same thing.

Software-as-a-Service (SaaS) is: software that is made available for use based on access to features, time, number of transactions, number of users, or a combination of variables.  A ‘cloud’ is simply a server – a computer you don’t own or maintain – that sits somewhere other than in your building, that you access to run applications or store data.

SaaS describes a type of software, cloud describes a type of platform.

So you can see it’s possible to take applications that you own, and put them in ‘the cloud,’ and also possible to use software you don’t own, but pay for based on usage, that is sitting in your data center with all your other applications.

But there are more important distinctions.

Type of Software-as-a-Service: Is it software that only you access (single tenant), or is it an application that many other people or companies use (multi-tenant)?  Multi-tenant is generally lower cost, but with less specialized functions for your particular enterprise.  Is it truly SaaS, or just a full cost, configured-for-you application hosted by someone else whose costs have been spread out monthly over 5 years to look like a SaaS solution?  True SaaS works like a subscription: sign up, pay by month and use it; when you no longer need it, you cancel.

Type of Cloud: Is it a private or public cloud, or a hybrid?  A private cloud is a single tenant environment (your enterprise) where you control access and have firewalls for security and where you can define the hardware.  A public cloud is where you are paying for a part of an existing cloud server environment; here, you “rent” space and the advantage is flexibility, low cost, and the ability to scale capacity up or down based on your needs.  Hybrid clouds offer both private and public spaces for you to use.

Let’s look at examples; in both cases we will use the scenario of a manufacturing company selling to major retailers in the U.S. and Canada.

True SaaS:  You contract with a company that offers tools for analytics (software) together with point-of-sale (POS) data for your products for your largest retail customers.  You pay by month to access and analyze POS data. The costs vary depending on how many report levels you want to see.  You access the application via internet, anyone in your company can use the service, and you can cancel at any time.

True Cloud: For purposes of experimenting with business intelligence applications, you purchase database space from a vendor, at a cost that varies depending on how much space you use.  You can scale up or down in terms of the storage you need.  You can connect to this space with a variety of tools for transporting  data and you can install and remove applications easily.  For running your business day to day, you can host your most critical applications in this cloud, and have in reserve an identical cloud with servers ready to take over in cases of disaster or over-capacity of your main servers.

Before you accept at face value the terms ‘cloud’ or ‘SaaS,’ make sure you understand what the vendor is telling you. Ask for details and explanations.  What the vendor thinks is cloud or SaaS can certainly be different from what you expect.

Another kind of Saas: The village of Saas-Fee and surrounding mountains, in southwestern Switzerland. Photo by Robbie Shade, CC license.

Everyone has a SaaS version of the software your business is considering, right?  Vendors know that terminology like SaaS and cloud trigger generally positive reactions from potential customers — having these options implies the vendor is up to date with the latest advances in software platforms.

Never mind what the vendor calls it.  What you need to understand right from the beginning is: who owns the software, where is it hosted, and how is it priced?

1. True SaaS is software that you do not own and do not maintain.  Some vendors will promise to maintain their software and to support your users, but the application nonetheless is installed on one of your servers.  This is not true SaaS.
2. An application that is customized just for your business, hosted by the software vendor, and whose costs are just spread out over a period of years via monthly payments, is not true SaaS.
3. True SaaS is priced like a subscription, one that is, say, monthly, and that you can cancel at any time.
4. True SaaS will have little or no startup costs.
5. A SaaS application can be what is called “single-tenant” or “multi-tenant.”  The former means you are using an application that is configured just for your enterprise; the latter means you are using the same base code or a copy of the same base code that many other firms are also using.  The former will cost more.

Why would companies say their software is SaaS when it really isn’t?  Because the term SaaS has a halo effect — it implies the solution is advanced, quickly implemented, efficient, and inexpensive.  A vendor can even make the pricing look like Software-as-a-Service (#2 above).

Know the details before you waste too much time.

Related: A Software Vendor Checklist

Image by Aucitron, CC license

Cloud computing is being marketed as something new, but it’s not. A cloud is simply a server – a computer you don’t own or maintain – that sits somewhere other than in your building, that you access to run applications or store data. The loan calculators that are ubiquitous on the web run in a cloud that you access via the internet. Data backup services run in the cloud, as do other web tools such as Dropbox and Google Drive.

In fact, cloud computing, technically speaking, can be considered as any software you access that is functioning outside your desktop computer and outside any server that is physically on your company’s premises or within your company’s security firewall.

If you read an ad that says: “Get more out of your data with business intelligence in the cloud,” it could be a vendor selling a SaaS application, database hosting services, or both.

Companies with limited IT resources should always consider a cloud solution. What is new in cloud applications is an expanded range of products and services – today some companies can run nearly their entire business in a cloud environment.

Instead of investing millions in a traditional on-site suite of integrated applications for sales, accounting, logistics and human resources, companies can securely access these solutions as if they were residing on a server inside their building, but without the cost and maintenance of on-premise applications.

Enterprises using cloud applications also do not need to employ a staff of experts to maintain, troubleshoot and periodically upgrade the server(s) or software – all of that is managed by the cloud application provider.

The cloud is made possible by high-speed internet connections and the huge decrease in the cost of computer processing and memory over the past decade. Stronger security methods have also contributed to the growth of the cloud, although some companies are still hesitant to trust a third party with their sensitive corporate data.

Inexpensive cloud applications are available if you can run your business with standard, non-customized applications. Enterprises can access what is called a multi-tenant version of the software – where several companies use the same software, but whose transactions and data are separated from one another by functioning in a different location or “node” of the software. This scenario is also effectively software-as-a-service (SaaS), because you don’t own the software, the vendor does, and you are simply renting it by paying a periodic access fee or a fee based on number of transactions or users.

Another option is for your enterprise to own its own customized software, but outsource the hosting of it on one or more servers and networks. This model has been around for years – many companies outsource the hosting of their applications to data centers. This is why cloud computing, for all its hype, is nothing new.