SaaS or On-Premise? Is Moving Applications Into the Cloud Really an “All-or-Nothing” Approach?

I read an interesting post recently on the Software Advice site regarding on-premise software deployments in an increasingly “cloud-y” world. The article entitled “The Cloud and Why Installed Software Isn’t Going Away” presented reasons from two perspectives: why software vendors will continue to invest in developing installed software, and why businesses will continue to buy it.

On the “Supplier” side, the article cited: revenue, pricing model, investment in current architecture, and the investment and risk involved in rewriting current software to run as a multi-tenant SaaS application, as key reasons why vendors will continue to invest in Installed Software. While these are very valid insights, they are focused on the market capitalization concerns of on-premise software vendors and do not bring market requirements into consideration. Software vendors that are only focused on protecting their current revenue streams and not adjusting their strategy to take advantage of new business models that have emerged due to innovative Cloud technologies will surely be left behind as their customers look to lower IT costs and solve new business challenges. Software vendors need to consider their customer’s requirements, concerns, and business challenges, because at the end of the day, it is all about the demand side of the business equation.

So let’s jump over to the demand side, shall we? The article outlines five reasons that consumers will continue to invest in installed software: security, the business model, the need for speed, the ecosystem, and customization requirements. These are the five basic “strengths” of an on-premise (installed software) deployment model. The five strengths of an on-demand (SaaS, cloud-computing, online) are lower infrastructure and IT costs, reduction in upfront costs and budget-friendly subscription based pricing, rapid deployment, mobile accessibility and automatic upgrades. Although the last benefit of SaaS, can also be an issue for certain types of software users. Think of the recent uproar when Facebook changed its user interface without any warning to the user community, and Facebook is a free service. Now imagine a similar change in a web-browser based software interface for a business. Yes, money is saved with automatic upgrades, but business disruption also costs money, as users scramble to figure out where their cheese has been moved to.  However, I digress, my point is that there are benefits to installed software models and benefits to SaaS models.  Is it really a case of one or the other?  Do you have to choose to overhaul your entire business management system and software solutions to take advantage of new business models that the Cloud offers?

What if you need ultra-high security for some areas of your business data? Or what if your business model calls for unique processes and workflow, and standard out-of-the box (or right off the web) doesn’t work for you and you need the ability to customize areas of the software?  Does this mean that you must forgo the cost-savings inherent in Cloud computing?  And most importantly, what about the investment that you have made in your current IT configuration, is it time to start all over?  If it is time to invest in new software – do you only invest in SaaS solutions?

So many questions! I definitely do not have all the answers – just ask my 13 year old.  But consider this…

Perhaps there are so many questions because Cloud-computing and SaaS business models are still “emerging technologies”. The SAAS acronym is said to have first appeared in an article called “Strategic Backgrounder: Software As A Service”, internally published in February 2001 by the Software & Information Industry’s (SIIA) eBusiness Division. The popular version of SaaS was coined at an SD Forum conference by John Koenig in March 2005 and is considered the tipping point of the industry adoption of the term “SaaS”.  As the software industry delves into the potential offered by new Cloud technologies, innovations will continue to emerge and software offerings will continue to evolve. SaaS offerings will continue to fluctuate for a while, with some vendors making it, and some not (remember the dotcom era?). Consumer demand will determine the types of applications that will thrive in a SaaS environment and the types of applications that will need to continue to be installed and controlled on-premise.

Perhaps, as the article brushes upon in the final paragraphs, it is not an “all-or-nothing” jump to the cloud.  The best of both on-premise and on-demand software worlds can be achieved by approaching your IT strategy as a “Hybrid Deployment” model. A Hybrid approach is where business applications that require the benefits of the Cloud live in the cloud, and applications that require the benefits of on-premise are installed and controlled in-house. This model provides organizations with the flexibility to select and combine cloud functionality and services with option to offload some of on-premise storage and services workloads to the cloud. The hybrid approach to application architecture can be utilized to meet many of today’s IT challenges. Hybrid deployment models offer the low upfront subscription based pricing of SaaS, while providing the security, speed, and customizability of installed software.

A Hybrid Deployment model allows you to get the most out of your current investment in business applications, while solving new business challenges and automating new processes by utilizing connected services.  Connected services are Cloud-based software applications that connect to your current on-premise software systems.  Hybrid also allows you to ensure you have the mobility and collaboration features you need to compete in today’s fast paced, ultra-competitive environment – as you can provide key interface points on mobile devices such as tablets and smartphones, while keeping your data securely on-premise.

With a Hybrid approach, you are in control. You choose which applications are installed on premise, and which live in the Cloud. Look for software vendors that provide the best of both worlds – offering you the benefits of on-premise and on-demand solutions. Perhaps, just perhaps, you can have your cake and eat it too.

About the Author

Michele Ballinger is the Product Marketing Manager (PMM) for Sage 300 ERP. In her 16 years with Sage and a Sage business partner, she has worked as a customer support manager, product implementation consultant, QA analyst, automated test script writer, product specialist/solution consultant (sales), and product manager. She is passionate sharing the vast benefit of automated IT solutions, including ERP end-to-end business management, Business Intelligence (BI), Manufacturing, and Supply Chain Management. She currently lives in the U.S., but works in beautiful British Columbia, Canada.