Hosted, SaaS, and Cloud Defined
“Hosted” customarily means applications installed and managed off premise, but with software licensed by the end user. Software as a Service, or “SaaS,” indicates subscription to shared applications that are only available online, and not as licensed, installed software. “Cloud” refers to computing power supplied by a shared, utility-like infrastructure that is accessed over networks.
These terms are fast losing any precision they ever had, and have become interchangeable in most conversations. More and more of the computing power companies use comes from outside their firewalls. The market seems to have settled on “cloud” as the generic term for all remote computing.
Importantly, the cloud is strictly an option for delivering computer applications. Users still have to interact with the applications essentially the same way as with premise installed software. That means labor costs typically stay the same when using the cloud, except perhaps for IT department resources.
Managed Services are Different
A new and critical dimension of the IT outsourcing discussion is whether some of the work – the human powered kind needed to execute business processes—can be done better by leveraging the cloud. When the skills required for specific functions are not part of a company’s core competency, outsourcing is a natural. Disciplines like payroll, e-commerce, and supply chain EDI seem especially well suited to this concept. They require high degrees of expertise and oversight, making people indispensable—not only in the set-up phase but also as part of day-to-day operations. But that does not mean the people have to be employees or work on premise.
Cloud architecture has indeed opened more components of a company’s operations to outsourcing. Now even high-volume, transaction-based systems can be integrated economically with in-house business applications such as accounting/ERP. Providers who address customers’ needs by bundling human-guided services with cloud delivery, called Cloud Managed Services, are becoming increasingly popular, especially for small and mid-sized companies.
Hosted, SaaS, Cloud, and Managed Services are often comingled in confusing ways. “Managed” is the key that usually denotes an element of manpower missing from the other terms. If you are comparing vendors, be sure to ask how much of your work they propose to do on your behalf. If “none” is the answer, you are selecting among alternative ways to run your current processes on different computers and/or different software.