Is it “SaaS” or is it “Cloud”? But Wait – Are You Asking the Right Questions?

You would think with all the talk about SaaS and cloud today that by now we would all be talking about the same thing. But in spite of, or perhaps because of the huge volume of discussion around SaaS and cloud computing, there remains much confusion over the terminology. Many use the terms “cloud” and “SaaS” interchangeably, but there are some important differences. So let’s distinguish between the two:

  • Cloud refers to access to computing, software, storage of data over a network (generally the Internet.) You may have purchased a license for the software and installed it on your own computers or those owned and managed by another company, but your access is through the Internet and therefore through the “cloud,” whether private or public.
  • SaaS (short for Software as a Service) is exactly what is implied by the acronym. Software is delivered only as a service. It is not delivered on a CD or other media to be loaded on your own (or another’s) computer. It generally is paid for on a subscription basis and does not reside on your computers at all.

All SaaS is cloud computing, but not all cloud computing is SaaS.

What about “On Demand?”

In the past I personally have used SaaS and “on demand” interchangeably. However the inclusion of this moniker in many product names today has led me to think I need to stop implying they are synonymous. Many companies that want to check the cloud box will append “On Demand” to their product name. But it doesn’t always mean the same thing. The use of the qualifier “on demand” can mean anything from a hosted model to loading and shipping it on an “appliance” that is monitored and managed remotely, to a single-tenant or a multi-tenant SaaS offering.

Even the difference between hosting and SaaS remains a source of confusion. I am always reminded of that when a survey respondent who I know is running a SaaS solution (because that is the only way their solution can be deployed) tells me they would not consider SaaS, but they would consider a solution hosted by their ERP solution provider.

I’ve cautioned in the past against confusing the way you purchase software with the way you deploy it. Refer back to that post for more information, but in short, in a hosted environment, the software is usually licensed, just as it would be if it were going to be run on-premise by the company who licenses it. But someone else is taking care of it. When the software is then accessed through a web browser, it becomes difficult for the end user to tell whether it is hosted or SaaS.

Hosted models are far from new. In fact they pre-date the existence of the Internet. Early hosting was called “time sharing” (and it had nothing to do with vacation homes).  The hardware resided “someplace else” and the software was accessed through a modem, via shared or (preferably) dedicated telephone lines. This was quite popular in the early to mid 1980’s until the price of hardware came down low enough to be affordable for small to mid-size companies.

But let’s say the solution is deployed in a SaaS model. If the solution is offered as a service, there are indeed different flavors SaaS. And here is where the arguments start. Some analysts, experts and industry observers insist their definition of SaaS is the only “true” definition. Most that insist on “true” SaaS also insist on a SaaS environment which is multi-tenant.

Multi-tenant SaaS: Multiple companies use the same instance of hosted software; configuration settings, company and role-based access personalize business processes and protect data security.

Single-tenant (or Multi-instance) SaaS: Each company is given its own instance of the (hosted) software, but may share common services, such as an integration platform, and security.

The truth is most consumers of SaaS enterprise applications don’t necessarily understand the difference between multi-tenant and single-tenant (or multi-instance) and may prefer the latter over the former for a variety of reasons.

The most significant difference between the two of these flavors lies in the frequency and flexibility of delivering upgrades, and the ability to customize the solution. Many assume that little or no customization is allowed in a SaaS solution. The general perception is that vendors are more likely to support customization and less likely to force upgrades in a single-tenant solutions. But don’t make this assumption because each vendor addresses the situation differently. Some single-tenant solutions discourage or forbid customization. Some multi-tenant solutions allow customization.

So instead of asking whether it is hosted or SaaS, or whether it is single-tenant or multi-tenant, determine first your requirements and secondly ask questions that will help you choose the solution that is best for you.

Do you think you need customization now, or that you might in the future? Instead of simply asking whether the solution is single or multi-tenant, ask what the policy is for customization. Ask how upgrades are delivered. How frequently? Are they “scheduled?” Or do they happen transparently? If they happen automatically are you able to selectively opt in to turning new features and functions on? Or might you be surprised by some new features or behavior that you are not expecting or prepared for?

These are just some of the questions that can be useful in deciding on purchase and deployment options. For a full analysis, see a full discourse on The Pros and Cons of SaaS ERP.

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7 Responses to Is it “SaaS” or is it “Cloud”? But Wait – Are You Asking the Right Questions?

  1. Pingback: Roundup of SaaS ERP Forecasts and Market Estimates, 2012 | A Passion for Research

  2. Jofrey Cubillos says:

    Services have the following elements in common:
    They can be delivered on and off premise (legal services, building maintenance, healthcare services, etc)
    They are charged on a per consumption basis.
    Legally speaking, they are not part of the assets of the company that uses the service.
    SaaS is just another type of service. So there is no reason to consider that SaaS can’t be delivered on premise.

    • mintjutras says:

      Jofrey – my purpose here is to gain clarity and I think you are adding to the confusion over SaaS. You may be legally correct but no software company will deliver Software as a Service “on premise.” They will require that a license be purchased. They may charge for the license as a subscription fee, but is not SaaS. What you are describing is a hosted environment.

      • Jofrey -Cubillos says:

        My point is that SaaS (Software as a Service), is a to generic term that on its own doesn’t prevent people from interpretations like the one in my previous comment.
        The term service by itself doesn’t imply off premise. Building maintenance, building housekeeping or utilities are pretty good examples of services that can only be deliveried on premise. I accept, that service involves that the underlying infraestructure is basically not under customer control. However there is always a portion that it is and in the case of software, that portion can take you to tricky scenarios: The upper software layer is mine as a SaaS supplier and it happens that the customer wants that layer to run on his hardware, OS and middleware infrastructure on premise, but paying a suscription fee for my layer. If I agree with this request, wouldn’t this be Software as a Service?
        On Demand seems to be a better option because refers to pay on a per suscription basis and put s away the issues with the location. However it is more an IT-related term not very business user friendly, which in my experience has proven to be a key issue
        In order to try to avoid those grey zones, I prefer the expression CBBS (Cloud Based Business Service). By using the term Cloud Based, this relates in almost a 100% to technology (Hw, Sw Infrastructure and Sw App) off premise being paid on a suscription basis. By using the term Business Service the expression gets closer to those deciders and influencers at inner the companies who are going to actually ‘experience’ the service.
        I emphasize ‘experience’ because this is not only related to the set of feature the software has, it also involves the business processes driven support we can provide as a CBBS vendor. You don’t need to have any understanding of customers business processes when an user calls for support for its email or spreadsheet Cloud based software. But when he calls for issues with his CRM, ERP, WMS, of tailor-made-business-process-focused on the cloud app, the story is very different.
        Business Service, put things into real context and enables us as vendors to differentiate value, that otherwise the customer is not going to appreciate (despite of being there y having a cost to be deliveried).

        • mintjutras says:

          Jofrey – as the title of the blog indicates, I am really less concerned about what you call it and more concerned that those evaluating these options are asking the right questions. But since you brought it up CBBS (Cloud Based Business Service) can introduce confusion over what has been traditionally called managed services. In this case, not only is the software hosted, but the hosting company actually uses the software to perform the functions it is meant to address. For example, using managed services, the hosting company might actually become the (surrogate) accounts payable department for its client. This might be a cloud based business service even though the software is licensed in a more traditional manner. The software is not being delivered as a service. Even if it is cloud based, a labor-based service (not software) is purchased.

          • Jofrey Cubillos says:

            To be honest I see no space for CBBS to introduce the confusion you mention.
            CBBS= Bussiness Apps provided from the cloud + business-driven technical support (that understands the app but also de the business processes it works for).
            If the vendor’s hosting people started using the software for the client, then that vendor would behave no more as a CBBS but as an outsourcer for that client’s business processes. It would become a BPO.
            To note,my company recently acquired a subscription to Microsoft Sharepoint that enables it to install it onto its own servers.
            Additionally, from the accounting and tax perspective, that subscription is considered an expense and therefore is not part of the companies assets (as any service has to be).
            This is true evidence of SaaS on premise.
            That is why I insist that in order to let clear that the software is provided from the vendor’s cloud, CBBS is a better term.

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