Software: On Premise or SaaS?

by Tom Hoey 0 Comments

Although SaaS software has existed in its current form since the 1990s, only recently has its offerings begun to rival those of the tried and true traditional on-premise software solutions.  In a study by Gartner, SaaS sales reached $10 billion in 2010, and it’s expected those numbers will double by 2015.  Though this doesn’t necessarily mean on-premise solutions are falling out of style; software will always need to be hosted somewhere.  What it means is that the question of which of these design philosophies to go with for your situation is now far more one worth asking.  Today it’s common to find two software offerings of similar services, one on-premise and the other SaaS, and the choice between them boils down to choosing what style is best for your situation.

Ahead, we’ll go over some of the major comparison points to consider when deciding whether you’d like to host your own software solution, or acquire it through SaaS.


When it comes to comparing the costs of on-premise and SaaS, time is the important factor.  In other words, day one, the SaaS software will almost always appear to have a lower cost, but after five years, on-premise tends to take the cake.  The reasoning for this comes down to their typical pricing models.  SaaS usually uses a pay-as-you-go, usually per month, sometimes per number of users, pricing scheme, whereas on-premise costs involve not only the software licensing but the equipment to host it as well.  Up-front costs for on-premise software can be huge: including the software licensing, the server machine to host it on, lab space for the machine, and even the air conditioning needed to keep the server room well ventilated.  Unlike SaaS however, where the investment continues to accumulate over time, once on-premise purchases are made, the investment is mostly complete. It should also be noted that using a virtual machine on an existing server machine to host the software can drastically reduce these up-front costs, since it eliminates the need for a brand new one.


Another point of interest when deciding between SaaS and on-premise solutions is the amount of control that’s desired over the system.  This is also a two-sided coin, as less control can be desirable for the sake of ease and simplicity, however more control allows for a high level of customization of the software, without the delay required to contact your hosting company to request the changes.  Furthermore, on-premise software requires technically inclined employees to administer it, whereas access to SaaS software is at the mercy of the hosting vendor.  Troubleshooting issues with SaaS software is difficult for this reason, but issues should also hopefully be the responsibility of the hosting vendor.  Another worthy concern is if the SaaS vendor were to fail in some way, whether due to a power outage, or even cease as a business altogether, you will experience unexpected downtime as a result, without a whole lot of options for continuing to use the service, or even retrieve your data, which brings us to the next point of comparison.


Security should of course be a major priority no matter the project, but when you look at some of the services SaaS solutions are offering, such as Salesforce or LinkedIn, it becomes clear that the data these software are working with is often highly confidential.  With that in mind, it’s a necessity to trust your SaaS vendor, as opposed to keeping all such data local with an on-premise solution.  Your vendor is not the only concern with SaaS, as all SaaS interaction takes place over the Internet.  This means that potentially sensitive data is being broadcast across the Internet all the time, albeit through a secured connection, however the very nature leaves it open to compromise by man-in-the-middle and other sorts of hacking attacks on Internet traffic.  With on-premise software, your security is more focused on managing access internally.


Application Integration is an important challenge today, since an employee uses so many applications for different tasks throughout their work day.  A lack of application integration means data redundancy, inconsistency, and an overall lack in productivity.  The short of this comparison is that SaaS software often has limited integration, and that integrating on-premise software with other applications is very commonplace, and likely far simpler a task.


Tags: Authentication Security, Gartner, Integration, IT Security, LinkedIn, On-premise, SaaS, Saas vs On-premise, Salesforce, User Authentication

Tom Hoey

Author: Tom Hoey