Software-as-a-Service (SaaS) and cloud computing may sound like they’re referring to the same thing; a product or service that’s available “via the cloud.” After all, both terms indicate that the product or service will not be on-premises. However, these two terms refer to very different things.

What Is the Difference Between SaaS and Cloud Computing?

According to the official definition provided by National Institute of Standards and Technology (NIST), cloud computing is “a model for enabling ubiquitous, convenient, on-demand network access to a shared pool of configurable computing resources that can be rapidly provisioned and released with minimal management effort or service provider interaction." Examples of computing resources include networks, servers, storage, application and services. “At a high level, the cloud is effectively a bunch of standardized building blocks that can be assigned and used for a certain task to quickly build out infrastructure to host virtually any applications. These blocks can include virtual servers, databases, storage, load balancers and much more,” said Mark Walker, founder of AWcode.

The cloud model itself, according to NIST, is composed of five essential characteristics, which are measured service, on-demand service, resource pooling, rapid elasticity and broad network access; four deployment models, which are private cloud, public cloud, community cloud and hybrid cloud, and finally, service models which are Infrastructure-as-a-Service (IaaS), Platform-as-a-Service (PaaS) and, of course, SaaS.

Essentially, SaaS is a subset of cloud computing. However, it is important to note that not all SaaS models are built-in the cloud. SaaS products or applications can be built on a local terminal and deployed to a cloud-based server. The product itself is accessed and utilized through a web browser. “SaaS, PaaS and IaaS are subdivisions of cloud software in the same way that a motorcycle and a sedan are different classes of vehicles,” said Alan Santillan, marketing specialist at G2 Crowd. “SaaS is cloud software, but cloud software is not all SaaS.”

Walker highlighted that SaaS-based products have two key characteristics. The first characteristic is that “the software is served directly to you, hosted, pre-configured and ready to go. With nothing to install, no hardware to purchase, no backups to worry about, this significantly lowers barriers to market entry.” The second characteristic is that you do not own the software. “[With SaaS], you are purchasing a service, meaning you do not own the software you buy. This typically relates into a subscription model, sometimes with a free tier (freemium) where you are paying every month or year for the service,” said Walker.

Related Article: Cloud Service Models (IaaS, SaaS, PaaS) + How Microsoft Office 365, Azure Fit In

Do You Need a SaaS Product, or Cloud Computing?

“[The] advantages of a SaaS application are that you have a faster installation time and that you don’t have to worry about future upgrades, given they are done automatically by the hosting provider. A great example is Gmail, a mail service offered by Google,” said Crisantos Hajibrahim, head of product development at Prodoscore.

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However, Hajibrahim noted that despite the advantages, SaaS does have some drawbacks. “[One] disadvantage of a SaaS application is there is limited ability to customize your deployment,” said Hajibrahim. He also noted that larger manufacturers might be resistant towards using SaaS applications for running their operations. Proprietary process attributes that are a “closely guarded secret” in a manufacturing firm may not be comfortable in letting a SaaS product access this kind of data. “[With the cloud], no updates or maintenance is required, and the storage of files can occur almost instantly. Additional benefits are lower cost, better security and that the cloud has access to greater “horsepower” to perform robust calculations, if needed,” said Hajibraham. He added that cloud products can automatically back up data, preventing you from losing all your data.

As for cloud disadvantages, Hajibrahim said, “It is hard to think of a 'con' to the cloud, unless your internet access is spotty. Then, you may lose access to files at an inopportune time. Other than that, no other disadvantages really exist.”

Related Article: How Document Management and Content Management Differ

Is SaaS Becoming the Cloud Champion?

While both SaaS and cloud are definitely not the same thing, SaaS seems to be the go-to cloud product model for SMBs and large companies looking to expand their business activities. Blissfully reported in June 2018 that SaaS spending will double by 2020. “The world is increasingly going to a cloud-based world with apps residing on platforms, delivered as SaaS programs. Only highly customized, proprietary applications that must operate with 100 percent guaranteed uptime make sense to be installed on-premises, at least today. Over time, this advantage will likely deteriorate,” said Hajibrahim.

Furthermore, the SaaS industry itself is growing, with more martech and other technologies emerging all the time to serve startups and enterprises alike. According to Walker, the SaaS business model is “very attractive." “Recurring revenues are very attractive to SaaS businesses, giving a predictable revenue stream, while affordable monthly payments benefit consumers or businesses who no longer need a larger upfront outlay,” Walker explained.