I think that too many people get hung up on the first "S" in SaaS, when it's really about the last "S". SaaS is not about playing hot potato with the server in

I think that too many people get hung up on the first "S" in SaaS, when it's really about the last "S". SaaS is not about playing hot potato with the server infrastructure and trying to farm it out to the lowest bidder. SaaS is about providing your customer with a reliable software platform, while removing headaches and leveraging economies of scale. There is no reason for every little company to have their own micro server-farm to host their CRM app. There is no reason for every company to maintain internal knowledge on the care and feeding of that app. These companies can benefit from outsourcing the care and feeding and hosting of that CRM app to a centralized provider, like Salesforce. SaaS vendors should eat their own dog food. They should use their own app, to the extent possible, so they experience what the customer experiences. SaaS vendors also need to make sure that app is always up, always online, and always zippy. You can't really do that if you outsource a key piece of what makes the app what it is: the server infrastructure. At my last company, someone used the phrase "you can't outsource liability" a lot. That applies here as well for SaaS vendors, you can't completley outsource the "liability" of your server farm without also losing control of your ability to provide availability to your customers. You can reduce overall liability by taking advantages of things like S3/EC2, but you can't eliminate it. As my own company is delivering an SaaS app, and building the infrastructure to make it available, I have said many times that EVERY datacenter provider WILL have an extended outage at some point. Put all your eggs in one basket, and it's just a waiting game. Spread your chips out to different vendors AND different geographic areas and you better ensure that you have no one single point of failure. The SaaS vendors who think they are only about the software, and try to outsource 100% of the computing cloud are the ones that will die. The SaaS vendors that recognize what their customers are actually buying (a hosted app all inclusive) will fare better in the long run.