Choosing Between Cloud Based vs On Premise Software
25 August 2016 • 5 min.
When searching for new software today, you are likely to be confronted with the choice of a cloud based solution or an on premise solution. For those who haven’t spent much time in the IT world, the pros and cons of each may not be clear.
In today’s post, we are going to define each of these options and present the strengths and weaknesses that they pose.
Understanding the Difference
In the past, all software was on-premise because internet access was still not widespread or fast enough to support cloud based deployment. Today, cloud based solutions are quickly becoming the standard for both complex systems like CRM or ERP to the everyday basic tools like word processing or spreadsheets.
On premise software is hosted locally on your computers and servers. Normally, this kind of solution is purchased in a one-time transaction that provides you with a licence to use the software indefinitely. Major updates normally require purchasing a new licence.
Cloud based solutions, on the other hand are usually accessed via a web browser and all of the data - including the software itself - are hosted by the provider. Unlike on premise software, a monthly or annual subscription model are the standard for cloud based software. Major updates are usually rolled out to all subscribers at no additional cost.
Why Businesses Choose On Premise
Businesses often choose on premise software because it is familiar and comfortable with the model, however there are many other important factors that play a role as well. In general, on-premise systems are more customizable that cloud based. These customizations can result in lengthy implementation periods though.
Other companies prefer on premise because they don’t want to have a monthly or annual expense, even if it means a higher up-front cost. Depending on how long the software will be used for, its lifetime cost may even be cheaper!
- Greater customization options
- No recurring payments
- Local control of data security
- Not dependent on access to internet
- Large up-front cost
- Hardware investment cost (i.e. local servers)
- Long implementation period
- Longer wait time, higher cost for updates
- Accessible only from installation location
Why Businesses Choose Cloud Based
One of the primary reasons many small to medium sized businesses are choosing cloud based software is the much lower up-front cost when compared to on-premise software. This software-as-a-service model also comes with other advantages for businesses like a shorter implementation period, no infrastructure investment (i.e. servers), as well as increased stability thanks to regular updates.
Security of data can also be an important factor for a business deciding to use a cloud based software solution. The fact that the vendor is (normally) responsible for data security can be a benefit or a liability depending on the nature of the business. After all, the security standard for the data held by a law office or medical firm is quite different from that of a retail store.
- Cheaper initial investment
- No extra hardware necessary
- Data security outsourced to vendor
- Continuous updates at no extra cost
- Easily accessible from anywhere
- Shorter implementation period
- Less customizable
- Vendor may increase recurring cost
- Dependent on internet access
How to Make the Right Choice for Your Company
Each company has different needs and priorities. There are multiple factors for why you may choose one type of software or the other but the most important thing is to evaluate your choices based on your unique position.
The type of software you are looking at is a very important issue to consider. While you may prefer to use on premise software for word processing and spreadsheets to ensure you have access even without internet, mobility and portability may motivate you to choose a cloud based ERP/CRM software like Sellsy.
As each kind of software has it’s own advantages and disadvantages, it may be helpful to work with your team to create a scorecard so you can take each factor into account before making such an important investment.
While you can alway change your mind and switch softwares if you find that your decision wasn’t a good fit, but such changes are costly and time consuming - not to mention frustrating for your employees. I hope the information here will help you to make the right choice the first time!