SaaS vs On-Premise! Here’s Why On-Premise Deployment is Not the Safest Option Anymore
Software as a Service (SaaS) has been developing its credentials over the last decade, many functionalities which were considered incongruous with the cloud model of operations, have been streamlined now. In the past decade, many large-scale companies have seen a substantial increase in the profit share of their cloud based computing and SaaS products.
Morgan Stanley predicts that 30% of Microsoft revenue would be purely from its cloud products by 2018. Moreover, Microsoft predicts that the revenue from their new-cloud licensing would be up to 1.8 times the revenue from non-cloud licensing. Technology Business Research (TBR) predicts that the global revenue from the cloud computing platform would be $167 Billion.
Considering the potential of the SaaS model, it is important to compare it with an On-Premise set-up over some key differential points.
Traditionally it was acceptable that large companies develop or buy-in a Management Information System (MIS) on the company premises. This entailed investing heavily in equipment, development, maintenance, support, and adoption training. The data generated through the various operations of the company was stored and secured on-site. This was singularly the biggest selling point for the entire On-Premise deployment of the system. The platform and the software was developed in-house (or through vendors) customized according to the company.
SaaS came with its own platform and software along with a set of standardizations that followed industry best practices. The cost of enabling a SaaS system within the company was far less than that of an On-Premise system. The pricing model of SaaS was one of the key selling features of the model. A subscription structure of payments helped the company plan its investments better. The SaaS model opened various Enterprise Resource Planning (ERP) software to those who couldn’t afford the cost of On-Premise deployment. Cloud computing came as a blessing to the small and medium sized enterprises (SME).
Let’s analyze the major decision points analyzed while considering undertaking integration on On-Premise Vs integrating a SaaS model.
Speed of Deployment
|Deployment speed is slow as it requires movement of high-end machinery, setting them up, enabling a platform for the system, and adding a proper support & maintenance structure.||Deployment speed is quick as the platform and software is developed by the vendor and deployed off-site (cloud). The support and maintenance is handled by the vendor.|
|Customization of software is high as the features are developed as per the requirements of the company.||Customization is lower (limited) as the features adhere to industry standards and best practices.|
|Adoption rate is lower as the high level of customization creates a learning gap that the workforce must fill. Employees should be trained on the customized software.||Adoption rate is higher as the original software is designed with best practices in mind. The features are designed with an intent of easy usability.|
|There is a higher one-time fixed cost (depreciating over a period of time). Support and maintenance costs are added as overheads (recurring costs).||There is a far lower one-time processing cost (fixed cost), while a subscription fees is charged as a recurring cost.|
|Upgrading On-Premise set-up requires an overhaul of the entire software/platform. The upgrade of the physical servers might require a process shutdown for the company.
The speed of upgrade is very slow, requiring hours of downtime.
|Upgrading the software is much faster as it doesn’t require any efforts from the company. Upgradation can be completed in minutes of downtime. Such upgradation can be done whenever any new innovative feature comes forth in the market.|
|High grade of security measures, as sensitive information can be stored on-site utilizing the company’s security protocols.||Similar grade of security, only difference being that the information is stored off-site and the responsibility of security lies with the vendor.|
Some countries/states have laws dictating where a company’s sensitive information should be stored. These laws indicate that the information collected from consumers from a specific state/country should remain in the boundaries of that state/country.
As the company grows, the ERP system needs to be scaled accordingly. With On-Premise set-ups, this would require shifting the servers and related hardware to another location, or adding more resources as required. This inadvertently adds to the deployment costs. However, a SaaS model wouldn’t require additional costs, only a higher subscription fee (with increased licensees).
Considering a field workforce, a cloud based software would be much more accessible (from off-location) than an On-Premise solution. Thus, a company can track, manage, optimize their on-field resources via a SaaS model much better than an On-Premise set-up.
Total Cost of Ownership (TCO)
The TCO of both deployment styles in the long term are similar. The fixed cost of the On-Premise, depreciated over a long term, with additional upgradation and maintenance costs is in the same range of a long-term commitment to a SaaS model. However, the value for money with the SaaS model is higher than that of the On-Premise set-up. The biggest point of difference would be the reaction time. A SaaS model could be calibrated as per industrial innovations within moments, however the same cannot be said about On-Premise set-ups. The downtime saved with the SaaS model could be used to further optimize the field workforce.
The Cost-Benefit analysis of On-Premise vs SaaS, tilts in favor of SaaS across industries and geographies.