(This post was last published on February 6th, 2018. It has been updated for accuracy and completeness.)
Cloud and Software as a Service (SaaS) are two terms you see all the time now. When evaluating different technology options to run your business, you’ll see descriptions like cloud-based, hosted, SaaS, IaaS, or PaaS.
It’s important to understand these terms because their differences affect how you interact with the different technology you use every day.
So, what do these different terms actually mean?
What is Cloud Computing?
Cloud computing (or referred to as cloud or cloud-based) and SaaS (Software as a Service) are closely related, but different terms. We’ll explain that more in-depth later. First, we’ll define each.
Cloud-based software is no longer emerging and disruptive technology. It’s mainstream and you use it every day whether you know it or not.
Cloud-based business applications range from organizational software like Trello and Slack to ERPs like NetSuite and email providers like Mailchimp. See the Top 100 cloud list for familiar software names.
Gartner forecasted that worldwide end-user spending on public cloud services to grow 18.4% in 2021 to total $304.9 billion, up from $257.5 billion in 2020.
So, what is the cloud? The cloud can be thought of as the internet.
If you’re using cloud-based software, you can use the internet (the cloud) to access that software whenever and wherever you are. You just need an internet connection and the ability to log into the system via a web browser. You can be on a desktop computer, phone, or PC. You can be at the office, home, or at the airport. It doesn’t matter, as long as you have WiFi.
In technical terms, cloud computing is the on-demand availability of computer system resources like servers, storage, databases, networking, etc.. It makes data centers available to many users over the internet.
Cloud Computing vs Traditional IT
Before cloud computing, companies would need their own computer servers or hardware on premise to use software applications. You would have to physically install a CD on your personal computer to use the software.
The problem is that maintaining your own hardware can be expensive and time-consuming. And, it can limit who uses the software since you have to install it locally.
From an IT perspective, cloud computing is a game changer. Teams no longer must own and operate their own hardware and software assets. In other words, they don’t need deep expertise to set up, maintain, and secure their resources.
Instead, they work with a cloud service provider, or a third-party who hosts your software on remote servers where they store and process your data. These servers are housed in data centers all over the world. Cloud computing can help save IT services costs because the provider is maintaining and sharing computer systems services across multiple organizations. And, teams can access their cloud services over the internet, wherever they are.
Gartner stated the proportion of IT spending that is shifting to cloud will accelerate in the aftermath of the COVID-19 crisis, with cloud projected to make up 14.2% of the total global enterprise IT spending market in 2024, up from 9.1% in 2020.
In other words, cloud computing is powering every industry. It optimizes IT costs, supports remote workforces, and ensures mobility and collaboration among team members.
Cloud Software Benefits and Examples
There are many benefits to cloud computing. You don’t have to host, maintain, upgrade, or worry about data security of the servers for your software applications. You have access to your data in real-time, whenever you need it. Costs are usually lower because you just pay to rent space on the hosted servers and you can scale resources as you need.
Major cloud service providers include:
- Amazon Web Services (AWS) – Amazon’s global compute, storage, database, analytics, application, and deployment services.
- Google Cloud Platform – Google’s core infrastructure, data analytics, and machine learning.
- Microsoft Azure – Open, flexible, enterprise-grade cloud computing platform
- IBM Cloud — Open and secure public cloud for businesses that includes hybrid cloud platform, advanced data and AI capabilities.
- Oracle Cloud Infrastructure (OCI) — Offers servers, storages, networks, applications, and services
With cloud computing, you’re responsible for maintaining whatever applications you run on the third-party’s (i.e. Amazon AWS) servers. The third-party maintains the physical servers and operating system.
To learn more about cloud computing, Microsoft also offers a helpful breakdown.
So, where does SaaS come in with cloud computing?
What Is Software as a Service (SaaS)?
Software as a Service is a software delivery model in which a cloud-based software application is licensed to a user. The application is accessed via the internet, meaning the user doesn’t install and maintain the software locally.
The application itself runs on the SaaS provider’s servers, making them responsible for the security, performance, and maintenance of it.
Typically, SaaS applications are licensed on a subscription basis. You pay a monthly fee based on level of service and number of users needed. In this way, a SaaS provider delivers and maintains their application to you over the internet, as a service.
SaaS Benefits and Examples
SaaS software has many known benefits. Just like cloud computing, it’s a cost-effective way to have real-time access to software whenever. Multiple users from 10 – 10,000 can have access to the same software. And, as the user you don’t have to worry about server maintenance.
Popular business SaaS applications are:
- Salesforce – A popular CRM that can be accessed through the internet
- Quickbooks Online – Access your accounting records from anywhere in the world
- Zoom – Log in via your web browser to start virtual conferences.
- Slack — Communication tool for groups,
You might also come across different terms such as IaaS and PaaS, which stand for Infrastructure as a Service and Platform as a Service respectively. They also involve cloud computing, but offer different capabilities as a service.
So, you can think of SaaS as a branch (or part) of cloud computing. It’s a license for access to a specific software application that you access via the internet.
Cloud vs SaaS
You can see that cloud computing and SaaS are closely related, but different terms.
With cloud computing, a user is able to customize and manage any software application on a server that is hosted remotely by a third-party like AWS. You are given access to your data on those servers via the internet.
With SaaS, you pay a subscription to access an already developed, cloud-based software application via the internet. You don’t have the responsibility of maintaining the software. One drawback of SaaS software is that you can lose some control over the management and customization of the application.
nChannel is a good example of both a cloud computing and SaaS application. nChannel provides a cloud-based integration software that connects retail systems like eCommerce, ERP and POS systems to sync data between them for merchants like orders, inventory, product information, and tracking/shipping.
How we deliver this cloud application to our customers is a SaaS model.
We built and own the nChannel application and give our customers access to it via the internet. nChannel maintains, manages, secures, and processes our customers’ data that is kept on remote servers in the “cloud.” We don’t maintain the physical servers themselves. We just maintain the application that is run on them.
To access our cloud-based software, our customers pay a monthly subscription. Multiple users can use it and access it via the internet.
As you can see, cloud computing and SaaS work together to bring easy-to-access, cost-effective software applications to all types of users.
Now that you understand what cloud and SaaS mean, check out these other articles: