Hosted services began as Application Service Providers (ASPs), which provided business applications in a hosted, managed, and centralized computing model. In the ASP model, the host provided and maintained a separate instance for each organization.

SaaS represents the evolution of the ASP model to a multi-tenant architecture. SaaS licenses software on a subscription basis and is centrally hosted, and is commonly used to provide office applications, database, development software, ERP, CRM, and other software. 

PaaS provides a platform for the subscriber to develop and run applications on a hosted platform. PaaS systems can include a database, servers, storage, middleware, network, and other services necessary for application development and deployment.

IaaS supplies infrastructure resources on-demand from a centralized data center managed by the provider. IaaS typically includes the operating system, storage, firewall, IP addresses, and virtual network. 

Advantages of using hosted services are as follows:

• Faster roll-out: The hosting provider already has the infrastructure, servers, and skills in place
• Low-entry costs: No need to buy servers, additional network resources, and data center space; no need to hire specialized skills

Disadvantages of hosted services are as follows:

• Cost: Long-term costs may exceed on premises costs.
• Dependence on Internet connections: If the subscriber loses Internet connectivity or there is a disruption affecting Internet access to the host provider, the system becomes unavailable.
• Bandwidth: Depending on the application, a significant amount of bandwidth may be required.
• Integration: It can be difficult to integrate hosted software with local applications. Integration of hosted solutions requires that the hosting provider support the entire solution set. There is no integration between hosted services of one vendor to the hosted services of another vendor.
• Regulatory concerns regarding privacy and data protection: Many countries and other jurisdictions have strict, and sometimes unique, regulations for protecting privacy and securing data. Some jurisdictions require sensitive data to be stored locally (in the country) and not in a data center in another jurisdiction.