Cloud vs SaaS: Definitions and differences

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It’s a common misconception that cloud computing and SaaS are the same thing. In actual fact, they have a close relationship, but each have different meanings. If you’re looking to revolutionise the way your business operates, it’s important to understand the differences.

Before we discuss these differences, we’ve defined the meaning of each and any related terms below.


What is cloud computing?

Cloud computing refers to the delivery of an IT service that is accessed through the internet and hosted remotely. The best way to make sense of this is to compare it to traditional on-premise systems that are installed onto a local computer or server with all associated data stored on the hard drive.

A key distinction of cloud computing is the subscription-based payment model, where you essentially pay for your services as you go, based on usage and requirements, rather than buying and maintaining a server of your own. For example, Amazon Web Services (AWS) or Microsoft Azure are examples of cloud computing that offer internet-based (or cloud-based) infrastructure, from servers to storage.

You can access cloud services anywhere at any time, providing you have an internet connection. As updates are rolled out automatically, you’ll always be running a secure and up-to-date version.


What is SaaS?

SaaS, short for software as a service, is a type of cloud computing. In other words, it’s software that’s hosted in the cloud, delivered to you over the internet as a service. It’s usually licensed to a user on a subscription basis, and the provider will maintain and update it.

SaaS offers a cost-effective alternative to on-premise software with low upfront fees and no requirements for in-house IT support or high spec technology.  It delivers a scalable solution that should be suitable for any number of users.

There are two other types of cloud computing too: platform as a service (PaaS) and infrastructure as a service (IaaS). These are pretty much what they say on the tin:

  • PaaS offers a cloud-based platform for users to create their own applications on development frameworks, without the need to manage or maintain the infrastructure themselves e.g. Google App Engine.
  • IaaS provides access to services like storage, networking, and servers based in the cloud with benefits such as security, business continuity, and disaster recovery managed for you e.g. Microsoft Azure.


Cloud computing graphic

At Codapay, we refer to our payroll software as cloud-based SaaS. This means our clients solely access our solutions through a web browser, and all associated data (including inputted information and the system itself) is hosted by our secure servers. In other words, there’s no need for the user to download and maintain a large file. Find out more about cloud payroll software and its benefits.


The differences between cloud computing and SaaS

To clarify the differences between cloud computing and SaaS, let’s quickly recap the concepts covered previously:

  • Cloud computing – offers services which are accessed through the internet and hosted remotely.
  • On-premises software – installed onto a computer where all data is stored, the opposite of cloud computing.
  • SaaS, IaaS, and PaaS – the three types of cloud computing.

So, cloud computing is a modern, scalable way to create and access IT services. SaaS is one of three ways in which the cloud can be used as a service. Think of cloud computing as an umbrella term – SaaS platforms are always cloud-based, but not all cloud-based platforms are SaaS (they may be IaaS or PaaS).

The image below outlines this relationship. To reiterate, SaaS is software which is based on cloud computing and is delivered to an end-user. A user can purchase a subscription and access it through the internet without having to download any large files.

With SaaS, you’ll receive a ready-to-use service. Spotify music streaming software is an example of business-to-consumer (B2C) SaaS, where a business offers the product to an individual. Codapay payroll software, on the other hand, is business-to-business (B2B) SaaS as it is supplied to accountancy firms and umbrella companies.

All data within these services (e.g. playlists on Spotify) will be maintained and secured on the provider’s remote servers. In other words, a local server is not required, reducing the need for a robust IT team to manage.


Cloud computing is huge, and it’s only becoming more prominent. In 2018, only 2% of UK businesses hadn’t yet used cloud services. For more updates on technology and payroll news, keep updated on our news section.

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