What are the Differences between SaaS vs On-Premises Solutions?
Interested in an analysis on SaaS vs on-premises solutions? In this article, we will describe the differences between the two types of software solutions. Let’s start.
In this article
- SaaS vs On-Premises Services
- Pros and Cons of SaaS vs On-Premise Software Applications
- Frequently Asked Questions on SaaS vs On-Premises Solutions
SaaS is a revolutionary concept in information technology product and service delivery. Businesses and organizations can opt for SaaS when they want to significantly reduce their need to design, build, deploy, and maintain the software required for their day-to-day business operations.
The global SaaS market generated a revenue of $197 billion in 2023 and is estimated to reach $247 billion by the end of 2024.
Let’s have a closer look at SaaS and how it’s different from on-premises services.
SaaS vs On-Premises Services
With the SaaS model, businesses buy a subscription to specific pieces of software from the vendor. Once purchased, company employees and anyone else who is authorized to do so can access the software in any location through an internet connection.
This model makes a SaaS solution and other cloud computing models such as Platform-as-a-Service that accounts for 20% of the total cloud computing market and Infrastructure-as-a-Service that accounts for over a quarter of this market running on third-party hosting completely different from traditional software products.
One of the main reasons for SaaS popularity is that it frees the business from having to install own IT infrastructure or software in-house and on its network.
Perhaps most beneficial is the fact that the SaaS model based on cloud computing technology frees companies from the need to maintain and manage the software.
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Instead, it is the SaaS vendor who takes responsibility for application performance, security of the data stored, and everything else.
Read more on what is SaaS in our article here.
We can analyze SaaS vs on-premise software on the basis of the following:
Cost
A cloud-based solution is comparatively cheaper than an on-premise application deployment and maintenance. SaaS solutions have flexible pricing plans to meet variable business needs. Moreover, upgrading is also not costly.
With on-premise solutions, companies should have IT support and human resources available to smoothly run in-house applications with routine upgrades, maintenance, etc.
Customization
High customization option is definitely an advantage that comes with on-premises software solutions. Most SaaS products do not offer many customization features, especially if it is a multi-tenant SaaS solution.
On-premise applications offer more control over their implementation, how data is processed, stored, etc. Cloud-based solutions do not provide much visibility on this.
Scalability
Cloud-based SaaS solutions can easily be upgraded and downgraded without much waste of resources such as time and money.
An on-premises solution is not that easy to upgrade and comes at cost of long-term planning, more cost and manpower required, etc. Hence, it is not a feasible option for a growing business.
Upgrades
Upgrades in SaaS environment involve less involvement of internal resources. The process is managed by the service provider and is less costly and time-consuming.
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Regulatory Compliance
An internal IT team has to spend enough time to ensure that on-premise deployment is secure and regulatory compliant. High-end SaaS vendors do this work for their clients. They offer necessary data protection and other security compliance services in the cloud environment.
Famous examples of SaaS-based solutions are the following:
- Salesforce;
- Microsoft Office 365;
- Box;
- Google apps;
- Adobe Creative Suite.
Our article here covers some tools for enterprise productivity by SaaS providers.
Pros and Cons of SaaS vs On-Premise Software Applications
Businesses enjoy the obvious benefit of cost reduction since they no longer need to host and manage software.
The other big advantage is standardization. Everyone knows Office, for example, so you don‘t need to spend time and money to train employees and customers on how to use it.
The same goes for many of the other top SaaS software services.
There are also disadvantages to SaaS. Standardized software doesn‘t allow subscribers to customize it while integrating it with existing on-premises applications can be complex.
Businesses that face stringent data security and privacy regulations may not be able to store their data in a remote, possibly off-shore data center.
What Else Is Different About SaaS?
- Each product needs excellent documentation since every part of customer interaction is done through the Internet;
- The quality of service must be superb since the customers are interacting exclusively through the Internet and need assurance that they aren‘t left to fend for themselves in an emergency;
- The sales cycle is far shorter than traditional IT products and services. Read this blog for more on SaaS sales stages.
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Final Thoughts
The growing SaaS market shows the huge profits small and medium businesses can make by proactively investing in the industry.
However, your success in the competitive SaaS market will depend on your SaaS product. For successful SaaS deployment, you will need skilled SaaS developers and managers on your project team.
Similarly, what kind of software service from SaaS and on-premises you should go with for your business processes depend on your specific business needs and goals. A qualified team of web and mobile developers will help you go with the right option.
If you do not find such talent on your team, contact DevTeam.Space to outsource expert software developers. Write to us your initial SaaS product specifications via this form and one of our account managers will get back to you for more details on how we can help.
Frequently Asked Questions on SaaS vs On-Premises Solutions
SaaS is a cloud-based service hosted and managed by third-party SaaS vendors. An on-premises application is installed in-house and usually supported by a third-party service provider.
An On-premise solution offers on-premise users complete over the application and better customization options of internal resources to businesses as compared to third-party cloud solutions, especially in enterprise resource planning software applications.
Costly installation, maintenance, upgrade, and scalability are some of the drawbacks of on-premises solutions. A cloud solution hosted with a SaaS provider offers better, maintenance, upgrades, data storage capacity, data backup and recovery services, etc. on more profitable SaaS pricing models.
Alexey Semeney
Founder of DevTeam.Space
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Alexey is the founder of DevTeam.Space. He is award nominee among TOP 26 mentors of FI's 'Global Startup Mentor Awards'.
Alexey is Expert Startup Review Panel member and advices the oldest angel investment group in Silicon Valley on products investment deals.
