I often hear the question, “What is the difference between Software-as-a-Service and Cloud Computing?”  The answer is that the Cloud is a utility based resource that companies can use to deliver software and services.  This can sometimes even be more confusing when Cloud Computing is referred to as Platform-as-a-Service.  SaaS is really the business model associated with the delivery of that software and services.

Until recently, it was a difficult for both customers and SaaS providers to use the Cloud to deliver robust, enterprise-class solutions because the Public Cloud was not really industrial strength.  There are real issues in using a Public Cloud solution for your SaaS offering today including security, integration, manageability, data location, auditing, reporting and overall compliance.

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One scary revelation that I heard recently is that the same billing system that is used in Amazon’s EC2 service is also the one that is used to buy that big screen TV at Amazon.com.  That might turn out to be an  issue if you were trying to maintain your SAS70 or Sarbanes-Oxley certification.

There have been a lot recent announcements regarding new Virtual Private Cloud offerings over the past few months by Amazon, OpSource, Savvis, GoGrid, Sun, IBM, Rackspace because the market is looking for a better alternatives to the Public Cloud.  Some of these Private Cloud offerings are more advanced than others, but the Cloud Computing providers are now moving in the right direction by offering solutions that are hardened to be much more acceptable to enterprise customers.  SaaS providers are also in need of truly reliable infrastructure solutions too, because they have to support their customers with robust SLA’s, especially for their enterprise customers.

Why SaaS providers are happy is because this type of enterprise Infrastructure-as-a-Service approach helps companies:

- Innovation.  It should be possible to try out a new product ideas with a small beta communities and if their tests work, then they can very quickly ‘productize’ them.  Because of the lower cost and rapid availability of resources it should make innovation process more productive.  How often do I remember working with someone on a Friday afternoon and them spending their entire weekend building out their idea. Now with this type of utility computing approach you can take it from concept to rollout much faster.

- Faster time to value.  Based on the Private Cloud product that I recently saw demonstrated, you can initially set up a secure, multi-tenant instance of your favorite infrastructure in less than 30 minutes and then create additional instances in just a couple of minutes.

- Security. Being able to leverage infrastructure that can pass muster when a customer’s Chief Security Officer is reviewing your offerings.  Even some small and medium sized businesses are publicly traded and operate globally and even these smaller firms have the same types of compliance and regulatory constraints that large companies have.  Private Clouds will make using a Cloud-based infrastructure more realistic for SaaS firms selling to these types of organizations (ie. most of them).

Then there are all the other benefits of pay-as-you-go and scalability that come with Cloud Computing, which are always of value to a SaaS company.

For software companies who haven’t already rewritten or moved over to a SaaS model already, a Private Cloud may offer other benefits.  There are still many companies who are concerned about not being able to offer a multi-tenant, SaaS solution to their customers and prospects.  Leveraging a Private Cloud type of infrastructure for these non-SaaS software firms, allows them to develop a migration path to SaaS that is much more affordable and realistic than in the past.  The days of building out your own data center, or even your own cage in someone else’s data center, are coming to an end.

Face it, even the Obama administration is rolling out their own Cloud based initiative - Apps.gov.  It is still quite early but Private Clouds will really speed the adoption of Cloud Computing by the majority of SaaS companies over the next five years.