Hosted, SaaS, Cloud-Based Services: What’s The Difference?

First, “Good question!” And second, “Why did I ask this in the first place?”

Ran across two things recently that inspired me to write on this topic…

One: In doing a little research into how web surfers find Proofpoint and the Proofpoint Email Security blog, I discovered some interesting statistics (and regular readers know how I love statistics).

My company generally describes its solutions as being “Software-as-a-Service (SaaS)” — because that really is the best description for its “on-demand” type offerings — or, in the case of things that are deployed on-premises (like email security appliances) as “cloud-enabled” (because they leverage various cloud services that we’ve built).

But it turns out that a lot of individuals, when looking for “not on-premises” solutions, use the term “hosted” in their searches.

For example, Google’s search engine reports 85% more searches for “hosted email encryption” than for “SaaS email encryption.” In the case of “email archiving” almost 5 times as many users search for “hosted email archiving” over “SaaS email archiving”. And for “email security” we see 6 times as many searches for “hosted email security” as for “SaaS email security.”

I have to say that I was surprised by these differences. Much higher than I had expected! So, should we just call these things “hosted” and get on with it?

I don’t think so… And here’s why…

Two: I recently became aware of a cool blog called Enterprise Features that touches on a lot of the same topics we cover here (see for example, this very interesting interview about Wikileaks and corporate privacy) where I read a really nice summary of the differences between the “hosted” and “SaaS” concepts.

In, “The Difference Between Hosted, SaaS (Software-as-a-Service) and the Cloud,” technology blogger Paul Rudo writes, “the most obvious difference between ‘SaaS applications’ and ‘hosted applications’ is that one is a ‘service’ that you use, and the other is a ‘product’ that you own.”

He notes also that there’s “some overlap between SaaS applications and hosted applications. You can reasonably say that all SaaS services are hosted, but it would not be accurate to say that all hosted applications are SaaS.”

He goes on to give a very easy to understand example around hosting a Wordpress blog versus subscribing to the SaaS version of Wordpress. (Rather than cribbing his entire article, I encourage you to read it here.) In the hosted case, he notes that there might be more control and flexibility, but there’s also more maintenance effort. In the SaaS case, one is taking advantage of the service that Wordpress offers, possibly losing some flexibility but gaining much in the way of convenience, security and lowered total cost of ownership.

It’s a great description, but I’d also point out that SaaS solutions also have an element of shared services to them (and this is one of the primary ways that SaaS reduces TCO).

As an example, in an email archiving solution, a huge grid of servers are leveraged to enable very rapid searches across an organization’s entire mail archive and we guarantee that — no matter how large one’s archive grows or how complex the search query — search results will be returned in 20 seconds or less. While each organization’s data is held in strict isolation, all customers have access to this elastic pool of computing resources to perform discovery.

This would be very hard and costly to replicate in a purely “hosted” model. Sure, you could “rack and stack” some archiving appliances in a remote datacenter, but you’d have to buy much more hardware than you would need on a day-to-day basis to ensure that same level of performance.

I could go on, but I think you can see that the difference between “SaaS” and “hosted” solutions isn’t purely a semantic one.

Readers, what do you think? I’m always interested in your comments!

Keith Crosley directs corporate communications for Proofpoint. Keith’s job entails the promotion of Proofpoint e-mail security solutions to press, analysts and the enterprise e-mail security market at large. His blog covers a wide variety of e-mail security topics including anti-spam, phishing, identity theft, data breaches and the policy, culture and technology issues that surround e-mail. Previous positions have included director, corporate communications at Elance, senior director, worldwide public relations at BroadVision and director of marketing at WiredPlanet.com. As a key spokesperson for Proofpoint and e-mail security evangelist/researcher, he takes part in television and radio appearances. Avocationally and semi-professionally, he is a filmmaker, musician and all-round multimedia enthusiast.

  • Very intriguing. I've often found that the line between Saas and hosted solutions does get a bit muddled and is difficult for some clients to grasp. Your example of “cloud-enabled” vs Saas solutions really helps to illustrate the subtle differences. Nice post.