Frequently when there is a new, hot buzzword, developers and organizations that want to be on the bleeding edge frantically try to figure out how to make their technology fit into the definition of that term so that they can also appear as if they are leaders, not followers. Typically, this fosters a sense of confusion for people on the outside looking in. "The Cloud" and "Cloud Computing" are recent examples that fit squarely under that umbrella. For example, I often hear people using the terms "Cloud Computing" and "SaaS" (Software as a Service) interchangeably, and I feel that there are some fundamental differences between the two.
I generally define "The Cloud" as an abstraction to illustrate any network or service sitting outside network infrastructure that you have direct control over. For example, in the case of a small company or enterprise, this could be their border routers that connect them to the rest of the internet. Cloud Computing and SaaS are examples of services that reside in "The Cloud." Where I believe Cloud Computing and XaaS (“as a service” offerings, in their many varying flavors) differ is that Cloud Computing refers to technologies that enable users to access large-scale technology-enabled services outside their own network. It is a convergence of third-party tools and services and internet technology. That is a broad definition, but the Cloud Computing term is a large umbrella under which other terms are defined.
There is a lot of overlap between Cloud Computing and the different XaaS definitions; however, there are some distinct subtleties that make them unique. For example, SaaS providers deliver and manage their technology remotely and take the complexity out of managing the solution yourself, typically using a revenue-per-user (RPU) business model. Many companies employ their own on-site filtering solutions managed by their IT departments. These solutions are frequently difficult to maintain and are rarely on pace with the latest internet threats. Another XaaS model that has been gaining momentum lately is IaaS (Infrastructure as a Service), like Amazon's Cloud Computing (EC2) environment. IaaS environments function more as virtual infrastructures utilizing a pay-for-use model enabling organizations to focus on their core competencies and less on the complexities of running and maintaining a server farm and its associated costs.
Cloud Computing and XaaS environments work well for companies who strive to focus solely on their core competencies. Tasks such as running a server farm, maintaining customer relationship management tools, and spam filtering are complex tasks, difficult to do well internally, despite the best efforts of already strained IT departments. With many businesses looking for every way possible to reduce costs and increase efficiencies, outsourcing functions outside of their core competencies is an effective way to reduce total cost of ownership, maintain a high level of effectiveness, and free up critical IT staff resources.