SaaS VS Hosted – Understanding the Differences

Lately, there have been several questions about Cloud Computing, SaaS and hosting, or SaaS VS Hosted. Professionals use these terms interchangeably and many people get confused trying to understand the difference. Even providers use these services in a way that confuses people even more.

SaaS VS Hosted


It all started in the 1990’s when IT was still at infancy. Hosting ideally means to purchase your preferred software solution from a Value Added Reseller (VAR) or publisher.


The software would then be installed at a data center/ ‘hosting center’where your leased/owned physical or virtualized servers are setup.


Then you would implement the solution just as you would ‘on-premise’ or at your company’s offices. In terms of payment stream, you would make a large upfront software payment, an hourly price or project based implementation; perhaps the hosting center’s initial provisioning fee, an annual software maintenance fee to cover bug fixes and newer versions.


There would also be a monthly fee for renting or using the hosting center’s equipment, bandwidth, and people. The long term ongoing fees would then include the monthly hosting fee, and any hourly billed/ annually contracted phone support for the client’s VAR.


Every few years, there would be added cost to the VAR to upgrade your software to the current version together with any modifications done.


Hosted Advantages

  • Indefinite license because you ‘own’ the software. You only get to pay once beyond the maintenance, usually 15-20% depending on your software publisher. Failing to pay for the software would mean that you would continue to work at that particular version you are on.
  • The data is in a secure data center where you may also find multi-site redundancy when disaster strikes. Furthermore, backups can be made reliable, enabling you to connect from virtually everywhere.
  •  Bring your app back in house with minimum interruption. “Virtual” servers, such as VMWare/ Microsoft Hyper-V are used by most hosting centers. If you are using VMWare or Hyper-V, you can quickly take your computer server and run it on your hardware.



  • In the long run, the monthly hosting cost may surpass in house cost, depending on variables such as your in house non-hosted solutions.
  •  If your office internet connection fails or goes down, you can’t access your system (this risk can be alleviated with the help of your office redundant internet lines).
  •  To integrate other software solutions to your ERP system, that solution must usually be supported and installed. The installation is done at the hosting center because it is very difficult for local apps to integrate – real time – with hosted applications.
  • You require a fair amount of bandwidth, more so if your app works with scanned photos and images because their upload and display may clog your internet ‘channel’.


Cloud Computing

Clouding computing normally refer to software deployment similar to hosting, except the servers are virtualized. In real sense, your application does not really run on any one server, but rather ‘shuttled around’ or spread across multiple servers – in real time – as required by demand.


To fully take advantage of the cloud to run across multiple servers, most applications need modification or writing. In cloud computing, you ‘rent’ servers, message capacity, communications, data storage capacity, and much more. They would normally charge you based on usage in minute increments that total up to real dollars, scaling properly from trial environments up to worldwide solutions.


In SaaS, a solution that can be hosted can also be held in the cloud and the deployment model can easily be resold to end user customers because it is more scalable and can easily be duplicated for new customers.



Looking at SaaS VS Hosted, SaaS allows small developers to offer a software application to their customers at affordable prices. Most of the mobile apps running on your Android or iPhone that communicate with other users are normally hosted in the ‘cloud.’ Even social networks such as Facebook and Socialcast use Cloud Computing.


Even Google suits the Cloud Computing definition as multiple servers, depending on worldwide demand, handle your searches at any instant.


Unlike hosted, it is not very difficult to create in house solution work in SaaS. In addition, the rewriting is minimal.


While looking at SaaS VS Hosted, you will realize that you get data security and redundancy with both. However, unlike hosted, cloud provides unlimited scalability. In the SaaS model software can be sold or ‘rented’.



  •  With time the transaction costs passed from a company that uses Cloud architecture through to the customer can ultimately exceed on-premise solutions.
  • It is much difficult to take a cloud-hosted app and bring it on-premise because of the distributed nature of its architecture.
  •  Existing apps often require some rework to fully take advantage of the cloud.
  •  It becomes even more challenging for disparate apps that need to integrate (for instance CRM and ERP) solution to function in the cloud, unless both SaaS vendors are willing to work together to make it happen. While software vendors can do this, it is not an easy task for end-users.
  •  Running many applications in the cloud can attract steep costs since each application often attracts its own fees, as you don’t pay per server used, but rather per CPU power cycles or unit of data.


SaaS is mostly a pure Web- or HTML-based solution mostly sold on a rented model, usually X dollars per user, per month. The major difference in SaaS vs Hosted applications is that while hosted applications may belong to an individual or company, SaaS apps are usually multi-tenant.


This is to mean that a database may have multiple end user customers, usually ‘partitioned’ from each other using some security model in the application, but not through separate virtual servers.


Compared with what a SaaS solution provides, a hosted solution may not only be expensive, but its durability, reliability, and scalability are all limited by the hardware. Redundant or machines dedicated to picking up the slack for specific components of the system.


For instance, to understand the difference between SaaS vs Hosted in this environment, a heavy search is a data-intensive request that can act as a bottleneck, making hosted sites run slowly, as both the web server and database are run on the same machine.


Omri is the Head of Demand Generation, as well as the Lead Author & Editor of the SaaSAddict Blog. Omri established the SaaSAddict blog to create a source for news and discussion about some of the issues, challenges, news, and ideas relating to SaaS and cloud migration.