Before the cloud came along, all business applications were considered “on-premise.” You bought a piece of software, installed it on your computer, and entered the license key, which typically only gave you the ability to use it on one computer. Then, faster and most robust internet connections made it possible to have applications hosted in the cloud and make them as easy to work with as if they were on your own computer. Ever since, cloud technology has taken off and become a dominant force, with companies like Microsoft Office and QuickBooks migrating their software to the cloud (along with everyone else!).

But just because the cloud is the newest option, doesn’t mean it’s the one that all companies want to choose for all applications they use. Some prefer the control you have over an on-premise software hosted on your own server. Others appreciate the freedom and cost-savings they get by using cloud solutions, also known as Software as a Service (SaaS). The average employee uses 8 different company applications. 

Technology acts as the backbone of just about every single office these days. No matter what business you’re in, you’re going to be using a variety of software applications to market your business, assist your customers, and provide products and services. While the average employee of a company uses about 8 different apps to do their work, companies typically have many more for different areas of their company. According to the 2019 Annual SaaS Trends Report by Blissfully, the number of applications used increases as a company gets larger. For example:

  • Companies with 0-50 employees average 40 apps
  • Companies with 51-100 employees average 79 apps
  • Companies with 101-250 employees average 99 apps
  • Companies with 251-500 employees average 123 apps
  • Companies with 501-1000 employees average 151 apps
  • Companies with 1000+ employees average 203 apps

Even at 40 apps for a typical small business, that’s a lot of software to administer and how you deliver that app, cloud or on-premise, can have a significant impact on your employees and your overall productivity and efficiency. If you’re struggling with a decision to use cloud-based or on-premise software, read on for some helpful pros and cons of each that can assist you with making an informed decision.

Comparing Cloud-Hosted vs On-Premise Software

We’re going to take a look at a few different areas of business operations and go over the pros and cons for each solution so you can see how they compare. While cloud solutions are definitely taking over, there are hybrid solutions as well, where workflows can be both in the cloud and on-premise, just depending upon your needs.

Pricing

Many companies choose cloud-based programs because they offer an immediate cost savings over on-premise solutions. They also require a subscription service where you’re paying monthly, rather than making a one-time software license purchase. But even with a monthly user subscription, the cost of ownership for using cloud as compared to on-premise remains less for multiple years. By year 9, is when the cost starts to even out between the two. But are you really going to keep a version of a software for 9 years without upgrading? Most likely not.

  • Cloud-Hosted Pricing Pros
    • Much lower cost at time of purchase
    • Cost of ownership stays lower for about 8 years
    • You can only pay for the users you need
    • Upgrades are included in your subscription
  • Cloud-Hosted Pricing Cons
    • You have to keep paying a monthly or annual subscription indefinitely
    • You don’t own the software
  • On-Premise Pricing Pros
    • Once you’ve bought the software, it’s yours forever
  • On-Premise Pricing Cons
    • Cost of ownership is higher and you’ll most likely upgrade before it gets lower
    • You’ll need to purchase for each user, even if someone leaves
    • Large initial cost outlay

Control & Administration

One drawback of using a cloud-hosted program is that you’re at the mercy of the company that is providing the software as a service. If they have an outage or their company ends up being bought out or closing, you could end up losing an important part of your IT infrastructure that you’ve come to rely on. It’s important to remember, that control comes with a price. That price is that if the server goes down, your company is the one that has to fix it. Everything is in your hands when you host your applications on site, so that means much more administrative time and associated costs.

  • Cloud-Hosted Control/Admin Pros
    • Someone else is responsible to keep the application running
    • Your user administration interface is typically easy to use
  • Cloud-Hosted Control/Admin Cons
    • You have to trust a 3rdparty (or multiple 3rdparties) to keep their platform updated and online
    • You may not have the customization features you might want
  • On-Premise Control/Admin Pros
    • You have complete control over your data and software
    • You can add customizations and integrations
    • You know exactly when any updates are going to be done and can arrange your own server downtime for those
  • On-Premise Control/Admin Cons
    • Cost of self-administration of the server and programs
    • You’re responsible if something goes down

Convenience & Security

There’s no denying that for mobility, the cloud is a clear winner because cloud applications are designed to be used on mobile and desktop and will come with apps for both as well as have web-browser access. When it comes to security, it can be an even split, depending upon how well you secure your server. SaaS providers typically have stringent security protections on their cloud servers because their business depends upon it.

  • Cloud-Hosted Convenience/Security Pros
    • Can be accessed from any device
    • Strong security measures
    • You will have more options for software because some are cloud-only (like Slack for example)
    • In the case of a natural disaster at your office, all your cloud-hosted data is secure
  • Cloud-Hosted Convenience/Security Cons
    • Your data is not located on-premise, so you have to trust that the cloud provider is keeping it safe from a data breach
  • On-Premise Convenience/Security Pros
    • You have physical possession of your server and all the software and data that’s on it.
  • On-Premise Convenience/Security Cons
    • May or may not have the ability to access your programs from mobile devices
    • If your security isn’t strong, your server could be left vulnerable
    • A disaster that causes damage at your office could take out your entire server and data if it’s not backed up up to cloud storage

Get Help with a Smart & Productive Cloud Strategy

It’s important to go into any transition or hybrid cloud/on-premise approach with a defined and thoughtful strategy. Managed IT Asia can help you fully evaluate the advantages of SaaS and formulate and deploy a plan. Get started today by calling +65 6748 8776 or reach us online.

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MANAGED IT ASIA, we are an IT Support, IT Solutioning and Managed IT Service Provider specializing in serving Small Businesses across Asia. Call us at +65 6748 8776 and let us manage your Small Business IT today!