Cloud computing for business applications applies the supply chain management model to composite IT service and applications, transforming from vertically integrated IT to an a cloud spanning application that is analogous to a traditional supply chain. The enterprise maps the IT service’s resource requirements to various cloud service providers, which may include: (see figure 1 below)

• Software-as-a-Service (SaaS): Complete, cloud-delivered applications.
• Business-Service-as-a-Service (BSaaS): Webcallable APIs for performing specific business operations, such as FedEx APIs for shipping or Dun & Bradstreet APIs for credit ratings (see www.programmableweb.com for examples).
• Platform-as-a-Service (PaaS): Online application—enablement tools and runtimes for providing application components, e.g. Force.com, RedHat’s JBoss hosted Drupal, delivered via PaaS. An extremely important observation is that using PaaS typically involves little or no programming. Exploiting PaaS is primarily customizing the PaaS functions through customizing data models, policies, etc. 
• Infrastructure-as-a-Service (IaaS): Low-level, usually hardware resources, for running the applications and software stack that the consumer supplies. Amazon EC2 is an example.           
   

Cloud computing currently focuses on IaaS and SaaS, but this will evolve over time to greater exploitation of PaaS and BSaaS. A platform or hardware server’s primary purpose is to support elements of a composite application. Almost all applications will exploit SaaS, but also need to integrate the SaaS application into a larger, business solution-specific composite application. The need for integration and customization will drive the exploitation of PaaS and BSaaS.

The motivations for cloud services evolving to the new model are:

• Cloud service providers specializing in:
• Surfacing business APIs through Web services and REST/HTTP RPC to complement web interfaces to the provider’s functions. For example, an enterprise can directly integrate FedEx capabilities into its applications and workflows, replacing manual interaction with the Web UI. This delivers greater efficiency and agility than implementing the corresponding function using development tools and platforms. The programmable web is simple the SOA assembly and choreography concepts applied to the cloud.
• Replacing low-level IaaS with higher value, integrated platforms (portal, business process management, etc. for executing elements of applications. This allows platform vendors to offer their products’ value to ride the “cloud computing wave” and the benefits of SaaS. Platforms optimized for application requirements reduce complexity of deploying an application relative to IaaS. Higher value allows a cloud provider to have higher margins.
• Enterprise selecting, deploying and managing the composite application by:
• Selecting the ideal provider for the various sub-elements of the larger application (Figure 2: Composite Application).
• Deploying the composite application into integration and application platforms running in the cloud.
• Managing and securing the cloud spanning application via infrastructure monitoring/management via SaaS, SaaS-enabled security systems (e.g. OpenID providers), etc.
  
  

An application/IT service following this model is an IT Cloud Service and cloud spanning application. The approach vastly reduces the cost and complexity by eliminating custom development of functional modules, acquiring and installing enabling software and hardware and exploiting greater cost and efficiency that cloud service providers can deliver.