This approach eliminates the large capital investment and ongoing overhead for a system whose capacity may often exceed or fall short of current demand. CaaS offers flexibility and expandability that small and medium-sized businesses might not otherwise afford, allowing for the addition of devices, modes or coverage on demand. The network capacity and feature set can be changed from day to day if necessary so hat functionality keeps pace with demand and resources are not wasted. There is no risk of the system becoming obsolete and requiring periodic major upgrades or replacement.
- (some information from Gartner Group, 2008)

What is SaaS?

Software as a Service (SaaS, typically pronounced 'sass') is a model of software deployment where an application is hosted as a service provided to customers across the Internet. By eliminating the need to install and run the application on the customer's own computer, SaaS alleviates the customer's burden of software maintenance, ongoing operation, and support. Conversely, customers relinquish control over software versions or changing requirements; moreover, costs to use the service become a continuous expense, rather than a single expense at time of purchase. Using SaaS also can conceivably reduce that up-front expense of software purchases, through less costly, on-demand pricing. From the software vendor's standpoint, SaaS has the attraction of providing stronger protection of its intellectual property and establishing an ongoing revenue stream. The SaaS software vendor may host the application on its own web server, or this function may be handled by a third-party application service provider (ASP). This way, end users may reduce their investment on server hardware too.
- (from Wikipedia)