More and more software vendors are moving to the cloud, offering their Software as a Service, besides an on-premise solution. Sometimes, they even offer some hybrid solution as an in-between, which makes it even more difficult to choose which would best suit your organization.
In this blogpost we dive a bit deeper into the differences and when you should go for one or the other solution.
On premise solutions
The traditional form of software selling, is on premise. Businesses buy a license to use the software and install it on their own machines/servers or in a datacenter. Everything is managed by your IT department – product upgrades, customizations, server maintenance etcetera.
Howell this is the most impactful on your own organization, it’s also the most flexible option. You can clearly decide what to do with the software, when to upgrade and even decide where the data is stored, critical in the current age of GDPR compliance.
From a financial point of view, a large initial investment would need to be done up-front. Along with a yearly (support) fee, to keep the license and support from the vendor.
Visually, this can be represented as follows:
Software as a Service
On the other side of the spectrum, we have Software as a Service (SaaS.) Software vendors offer a standard software package in the form of a monthly subscription. Customisations to the software can often still be done, however there will be some limitations to that.
Maintenance of the ‘core’ software and hardware is done by the vendor itself, so the IT department wouldn’t have to invest any time or resources into that. It’s assured to always run on the latest version of the software, with the newest features. This comes in handy when the specific software packages is frequently optimised by the vendor, as this is otherwise hard to keep up with. With this, new features instantly become available, without any additional costs.
Since the offered solution is mainly hosted in the cloud by the vendor, scalability is at the heart of the solution.
Based on the negotiated Service Level Agreements (SLA), the underlying hardware will scale to meet the targets set in the contract.
On the financial side, the large investment upfront for purchasing the software is eliminated. Only the subscription fee of the software is still valid.
Visually this trends as depicted below. Note that Hardware purchase, product upgrades and maintenance releases are eliminated from the previous visual.
What could add complexity is that sometimes software vendors offer a hybrid solution for their software.
Mostly, the vendor offers managed hardware. All the set-up and maintenance of the hardware is done as a service by the software vendor. They make sure that the hardware meets the requirements and are in charge of scaling up/down when needed to provide the contracted SLA’s. Updating the underlying operating system will be taken care of and security fixes will be installed by the managed services team of the vendor.
The software itself, on the other hand, is in complete control of your organization. Giving more flexibility to extend the solution and modify it to the required needs, increasing operational value. This also means that your organization is still responsible for keeping up with new product releases and upgrades, increasing the impact on your technical development team.
So, which one to choose?
Considering all this, the decision what to choose still depends on your organization’s needs and selected vendor.
However, generally speaking, one needs to take the following into account and question:
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