Cloud computing providers offer their services according to three fundamental models: Infrastructure as a service (IaaS), platform as a service (PaaS), and software as a service (SaaS) where IaaS is the most basic and each higher model abstracts from the details of the lower models.

Infrastructure as a service (IaaS)
In this most basic cloud service model, cloud providers offer computers, as physical or more often as virtual machines, and other resources. The virtual machines are run as guests by a hypervisor, such as Xen or KVM. Management of pools of hypervisors by the cloud operational support system leads to the ability to scale to support a large number of virtual machines. Other resources in IaaS clouds include images in a virtual machine image library, raw (block) and file-based storage, firewalls, load balancers, IP addresses, virtual local area networks (VLANs), and software bundles. IaaS cloud providers supply these resources on demand from their large pools installed in data centers. For wide area connectivity, the Internet can be used or—in carrier clouds -- dedicated virtual private networks can be configured., Qiang Guo (July 2012). "Infrastructure as a Service Cloud Concepts". Developing and Hosting Applications on the Cloud. IBM Press. ISBN 978-0-13-306684-5.

To deploy their applications, cloud users then install operating system images on the machines as well as their application software. In this model, it is the cloud user who is responsible for patching and maintaining the operating systems and application software. Cloud providers typically bill IaaS services on a utility computing basis, that is, cost will reflect the amount of resources allocated and consumed.

IaaS refers not to a machine that does all the work, but simply to a facility given to businesses that offers users the leverage of extra storage space in servers and data centers.

Examples of IaaS include: Amazon CloudFormation (and underlying services such as Amazon EC2), Rackspace Cloud, Terremark, Windows Azure Virtual Machines, Google Compute Engine. and Joyent.


Platform as a service (PaaS)
In the PaaS model, cloud providers deliver a computing platform typically including operating system, programming language execution environment, database, and web server. Application developers can develop and run their software solutions on a cloud platform without the cost and complexity of buying and managing the underlying hardware and software layers. With some PaaS offers, the underlying computer and storage resources scale automatically to match application demand such that cloud user does not have to allocate resources manually.

Examples of PaaS include: Amazon Elastic Beanstalk, Cloud Foundry, Heroku, Force.com, EngineYard, Mendix, Google App Engine, Windows Azure Compute and OrangeScape.


Software as a service (SaaS)
In this model, cloud providers install and operate application software in the cloud and cloud users access the software from cloud clients. The cloud users do not manage the cloud infrastructure and platform on which the application is running. This eliminates the need to install and run the application on the cloud user's own computers simplifying maintenance and support. What makes a cloud application different from other applications is its scalability. This can be achieved by cloning tasks onto multiple virtual machines at run-time to meet the changing work demand. Load balancers distribute the work over the set of virtual machines. This process is transparent to the cloud user who sees only a single access point. To accommodate a large number of cloud users, cloud applications can be multitenant, that is, any machine serves more than one cloud user organization. It is common to refer to special types of cloud based application software with a similar naming convention: desktop as a service, business process as a service, test environment as a service, communication as a service.

The pricing model for SaaS applications is typically a monthly or yearly flat fee per user,so price is scalable and adjustable if users are added or removed at any point.

Examples of SaaS include: Google Apps, Microsoft Office 365, and Onlive.

An illustration for models is shown