We all know that SaaS stands for Software as a Service. If asked, most CIOs would describe SaaS as Application Service Providers (ASPs) that provide hosted applica-tions. But that's not really 'services' at all. Services are supposed to be modular soft-ware components that provide atomic nuggets of business functionality.
But this popular definition of SaaS could change in a big way.

The fast-moving Enter-prise Web 2.0 movement, driven by SOA-like Services, Ajax, and Mashups, could give SaaS a second life by reassigning it to SOA and Ajax as a Service. Some might even label this SaaS 2.0. It is a trend every IT executive should be watching.

Much of the credit for SaaS 2.0 should go to Salesforce.com. Salesforce kept with its "No Software" value proposition throughout the tougher Web-years and, along with its HTML-based application, began exposing actual services to ISV partners. But, Sales-force didn't stop at exposing a few WSDLs. Why? Because it didn't provide a way for ISVs to provide richer services. This is what Salesforce.com's Apex development lan-guage allows. And the applications built using these resources are offered to the public as a collection of services in AppExchange. Now that is a meaningful set of services.

Amazon.com has its own analogs to the Salesforce.com services too. Less well-known but equally interesting is S3, Amazon.com's virtual storage service that is quickly being referred to as a "database in the Internet Cloud". I've heard some execs at Amazon say that they expose these types of services because they think corporate developers would find them as useful as Amazon does.

Both of these collections of services are pretty forward-thinking, if you ask me. If you believe in the Long Tail, these innovators will eventually generate far more income from third parties interacting via their services than the HTML applications hosted on their websites. A while ago I blogged about this idea and called it the 'Composite Company'. The idea is elegantly simple: a Composite Company is a company built almost entirely on other company's services.

Taking this idea to the extreme, Amazon really gets it when it comes to enabling Com-posite Companies. Beyond their basic e-commerce services, Amazon offers the Elastic Computing Cloud ("EC3") to let developers/companies install and run their software on as many Amazon CPUs as they need. And get this. It's $0.10 per instance hour! Two CPUs for 24 hours is around $5. My cell phone costs me more per day to operate. And Amazon doesn't stop there. They also have the added benefit of accessing their infra-structure services (think storage, queuing, etc.). Now your application services and in-frastructure services are all running on the same practically-infinite grid.