Do You Know the Difference Between SaaS and Cloud Computing?

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Cloud Computing DiagramWhen talking about software as a service (SaaS) and cloud computing, people tend to use the two terms interchangeably. Although the two technologies are related, they are not the same. So what is the distinction? Simply put, SaaS is a type of cloud computing. Let’s roll up our sleeves and dig into the specifics so you can better select services and products that will benefit your organization.

History and Clarification

SaaS has been around longer than you might think. During the 1960s, SaaS was referred to as a “time sharing system.” In this model, several “dumb” terminals (keyboards and monitors lacking CPUs) were connected to a mainframe or mini-computer, which hosted applications and data. When the cost of desktop computers dropped during 1980s and 1990s, workers had their own PC that hosted applications locally, while critical data was still hosted on a central server. However, as bandwidth costs decreased, the SaaS model for software deployment returned since it again offered a cost-effective solution.

SaaS has made its way back to the head of the class over the years – think Google Docs, Yahoo! Mail or SurveyMonkey. These are all SaaS technologies that are less costly than installing and maintaining applications on numerous desktops across an enterprise, making it a potentially attractive solution for many organizations.

Similar Benefits

Both SaaS and cloud computing are delivered via Internet technologies and offer similar benefits to users. For one, they don’t require painstaking installations or constant maintenance because they don’t reside on the user’s machine or an organization’s server. As a result, the IT staff won’t need to occupy your computer every 6 months to update your software or make sure you have the latest patch for a certain application. All of those maintenance issues are taken care of on the “server side”. Both SaaS and cloud computing are offered on subscription basis and can be accessed instantly – from anywhere a user has an Internet connection.

For folks looking to lessen the workload on their IT department, SaaS and the cloud provide an alternative to maintaining and updating software for each employee in the company. Instead, a company’s technology resources and staff can focus their attention elsewhere, a very attractive option for firms wanting their IT staff performing research and development or critical support functions.

Differences: Functionality and Data Security

The National Institute of Standards and Technology’s (NIST) defines cloud computing as “a model for enabling ubiquitous, convenient, on-demand network access to a shared pool of configurable computing resources (e.g., networks, servers, storage, applications, and services) that can be rapidly provisioned and released with minimal management effort or service provider interaction.” For the truly motivated amongst you, check out more information on the NIST cloud computing definition.

From a historical perspective, you could say SaaS led to the development of cloud computing, which is essentially a larger platform and is where SaaS resides. SaaS “sits in the cloud.” So cloud computing offers additional services other than just SaaS, while SaaS is only that: software delivered to an end user from a cloud environment.

Another critical difference between SaaS and the cloud is that with SaaS, all the data resides with the service provider. Unless otherwise indicated, the service provider can use your data in any way it sees fit. More often than not, the benefits of SaaS outweigh these concerns of data ownership and security. For example, many of us use a free email service that controls and stores all our data for us. Although we might want to know the company’s privacy policies, many of us will continue to use the service and feel relatively comfortable doing so.

With the cloud, you have more control. Although the servers are not local, you manage the data and software and can make backups and store data in the cloud. And you can move the data out of the cloud environment to your own local repositories – anything you would normally do with a bank of local servers.


In general, SaaS is often better suited for smaller operations that need inexpensive solutions for business needs. Cloud computing, on the other hand, makes more sense for larger firms that have more resources and also require or want more control of sensitive data and can better afford the cost for this type of infrastructure.

How the Cloud Works
Chris Bratten is a Sr. Logistics Consultant with Bastian Solutions' software division headquartered in Louisville, KY. Chris has been with the company since 2005 and joined after completing his masters degree in mechanical engineering at Purdue University.


  1. SPS Chauhan says:

    Good Article. I am clear now on SaaS & Cloud as I also used it interchangeably

  2. nimita says:

    I feel this small documentary very useful .And really want to know a real life example which uses cloud computing concept….
    & I am totally confused what does the word CLOUD ACTUALLY mean?
    Is it any virtual server or any service on internet or anything else?
    Sir,will you please explain about it in simple words through diagrams
    in simple language between two three days in same blog.

  3. Mike says:

    Clarification please:

    – SaaS is hosted in the cloud, but by another provider who controls your data.
    – If you want to control your data you CANNOT have SaaS?
    (Are their exceptions? I would expect there to be some workarounds?)

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