Great post over at Cloud Ave today titled, "Is the Cloud Going to Kill Conventional SaaS?"

I often get asked from people outside the industry what the "cloud" term means, but even more frequently hear it used interchangeably with "SaaS" from people within the industry. The aforementioned post does a great job of delineating between a SaaS offering and "IaaS" (Infrastructure as a Service). Many IaaS companies claim they are SaaS, but what they do is buy hardware you'd have to otherwise purchase, manage it in their server farm, and charge you a monthly fee. Like SaaS, this model removes the CAPEX component of an investment, and tends to offer the SaaS "pay-as-you-go" financing model, but it does not allow for the speed, flexibility, scalability, and inherent resiliency of a true SaaS solution. But these companies want to seem cutting edge, so as is the case in many areas of business, they grasp on to a term and continue to misuse and abuse it until this construed term becomes accepted as reality. In the case of SaaS, by throwing out the term, the company sounds as if it is up on technology, regardless of the reality of the situation. Now compound this with legacy SaaS companies like Salesforce (which, as cited here by Yobie Benjamin, only runs in its data centers), and you begin to understand from where the SaaS/Cloud/IaaS confusion stems.

So here it is: true SaaS runs in any cloud, public or private; it's flexible like that. And it is due to this architecture that SaaS can scale instantaneously, provide inherent redundancy, reduce infrastruce management, update its software in one fell swoop, and on the whole is much cheaper (and tends to operate in a pay-as-you-go model) than IaaS or traditional premise-based solutions. And it for this reason that industry types are dogmatic about the differentiation. If your product, like ours, is truly network, cloud, and device independent, you don't want someone that does not have those capabilities throwing the terms out there carelessly. It gives the whole industry (i.e. "SaaS") a bad name.