The line is somewhat blurred, but there is a line.
Would be best to describe it by looking a few years back, when we talked about ASP (and wondered why ASP never realy cought on).
ASP was about using an EXTERNAL package - this package included the hardware, database and application, all bundeled together as a package with maintenance services.
The advantages: outsource what you don't need inside. No need to manage hardware and maintain the application.
The drawbacks: TIMING (ASP came a bit too soon to the market), the core idea is good but inadequate security technologies and communication barriers (bandwidth) made it a risky choice for many organizations. Another main issue with ASP is that it's a single application that can be used by many, no customization, no changes, it's a "vanilla", take it or leave it package.
SaaS had much better timing. Everyone are now talking about it, it makes a lot of sense, and many of the technological barriers are gone. As organizations embrace new architectures such as SOA, it is becoming as a more viable option. But the more importnant thing is that while SaaS is a multi-tenant configuration, it does allow organizations to make SOME changes and customization. They don't have they're own specific application, but they can have an ISTANCE of their application, sharing the infrastructure, platform and application layer with other tenants.
Cloud software will be another development (we are now witnessing its growth). Cloud provides the "missing link" and it is the control of the data and of the application. In previous models - ASP and SaaS - organizations have no/limited control of their data. In SaaS they don't realy control the data or the application, they are consuming services and don't realy deal with the content of the services or how they are delivered. Cloud software brings the control back to the user organization, it can have it's own "cloud" (on or off premise). It can develop its own application from scratch (using PaaS - Platform as a service tools).
But cloud software will not eliminate the need for SaaS, both models will have a place: SaaS will become a model more suitable for commodity-type or lightweight processes, and Cloud will enable organizations to run heavier, core processes.
IaaS (Integration as a Service) is anothe piece of the architecture that will become more and more needed, as organizations adopt these solutions and will need to integrate them, as well as integrate them with internal, legacy, on-premise applications.
There is a very high chance that this is not the final phase of the evolution.
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