I just received the latest copy of Roger Sessions’ ObjectWatch newsletter (direct link to PDF), and there’s a great article in it explaining SaaS in terms of making your own doppio macchiato instead of going to Starbucks, then later gives an IT cost-avoidance example for SaaS that lines up perfectly with the espresso-making analogy.
He also discusses the two models of SaaS revenue: pay-as-you-go (like Salesforce.com), or watch-as-you-go (ad-supported, like Google, and like most mashups). There are many Web 2.0/SaaS services out there that have a watch-as-you-go free version, and a pay-as-you-go premium version — Flickr, Mollyguard and Nuvvo all come to mind — so the two models are definitely not mutually exclusive for one provider.
If you want a quick and easy way to understand SaaS, or to explain and justify it to your organization, some great ideas in this newsletter. Worth reading.