I just don't understand how can people accept option 3 in Software as a service question. Arey SaaS is software kiraya pe. Like Office 365 or Adobe illustrator. These heavy softwares are given on rent. It cannot under any circumstances be compared to Gmail. SaaS vocab hi last 7-8y me aaya hai. For eg - if you want to use Adobe Photoshop, rather than downloading, installing, you pay and you use. Heavy software ke rent model ko SaaS kehte hai, not web based mail clients ko. In the name of "ho bhi sakta hai" log D maar rahe hai. But, it is plain wrong.
There is pricing involved in SaaS and mail clients toh 2000 se hai, still why this vocabulary being used now? Office 365 is the perfect example of SaaS. You are using a heavy software online, by paying for it. I think any CS engg would vouch for it.