We can choose to outsource our applications and the hardware they run on, still being responsible for the whole software stack, including the operating system; or, we can simply use existing applications available from another vendor.

We can represent cloud computing as a stack of three different categories: Software as a Service (SaaS), Platform as a Service (PaaS), and Infrastructure as a Service (IaaS) as follows:

In the first case, the cloud computing model is defined as IaaS and we basically outsource hardware and every inherent service such as power supply, cooling, networking, and storage systems. We decide how to allocate resources, how many web applications, or database servers we need, whether or not we need to use a load balancer, how to manage backups and so on; the installation, monitoring, and maintenance are under our responsibilities. A notable example of IaaS services are EC2 from Amazon and Rackspace Cloud Hosting.

In the second case, the cloud computing model is defined as SaaS and is the opposite of IaaS since we simply use a turnkey software provided by a third-party vendor, who has no technical knowledge of the infrastructure it runs on; the vendor is responsible for the reliability and security of the product. Notable examples of SaaS are Gmail from Google and Salesforce.

Between IaaS and SaaS we find the PaaS model, which seems to be the most interesting solution from a developer's point of view. A PaaS system provides a platform with which we can build and run our application without worrying about the underlying levels, both hardware and software.