When it comes to choosing a business system, from ERP to CRM, one of the biggest debates is cloud vs on-premise. Or, more specifically, cloud SaaS vs on-premise. Which is the better choice for your business?
In this blog, we’ll be discussing the pros and cons of both types of systems to help you decide.
Cloud SaaS system
Let’s start with a brief definition. A cloud-based SaaS system is one that you can access via the internet. The program and associated servers aren’t located locally on your business premises. Instead, they’re available on the servers of the vendor.
Pros of a cloud SaaS system
- Lower setup costs - all the costs associated with setting up your system, for example, the hardware and servers, are handled by the vendor
- Lower maintenance costs and effort - all the maintenance costs and hassle (such as maintaining the servers and upgrading your system) are handled by the vendor
- Functional and technical updates are automated - leading on from the above, not only will the vendor updates your system for you, they’ll also keep track of updates. In addition, they’ll monitor the systems and automatically releases patches to provide technical updates and functional additions to the software
- Easy access to data even when on-the-go - because the data is stored in the cloud, you can access it wherever you are as long as you have an internet connection.
- Easy to scale up and down - whether you need to add more users, increase your storage space or do the opposite and downgrade, it’s easy to do so with the cloud. Simply upgrade or downgrade your account with the vendor and/or add more modular features when you need it, within minutes
- Built-in elasticity within the system - whether you have five users or 500, as long as it’s within the number of users you’ve paid for, your system will operate smoothly and consistently. Basically, your system can handle more load without the overall performance being impacted
- Data is very secure - one common worry is over data security because your information isn’t stored on your own servers. However, reputable SaaS vendors employ high-quality security experts who will monitor your data 24/7. Combine this with the automatic updates and cloud-based SaaS systems end up being more secure than on-premise
Cons of a cloud SaaS system
- Data is hosted by a third party such as Microsoft - because your data isn’t hosted on your own systems, you’re reliant on a service level agreement for data access (though you can access whenever you want to and strong measures are in place to protect your data from unauthorised access)
- Your systems will be evergreen - this is both a positive and a negative. The positive is that you’ll always be on the latest software version. On the flip side, you’ll be obliged to take updates to be on the most recent version, whether you like it or not
- You’ll need to reach out to the vendors for support - because it’s not a system that you designed from scratch, you may need to reach out to the vendors for support. For example, if you’d like to apply changes to your live environment
However, an important note to keep in mind is the reputable SaaS vendors will always give you notice before conducting system upgrades. Let's use CRM as an example.
Cloud SaaS CRM vendors won't just give you a heads-up, they also tend to conduct these upgrades outside of regular business hours to minimise the impact of downtime.
As for support, when you sign a contract, you’re often assigned an account manager who will be your point of contact and focus on your satisfaction with their product. So, if you did require their support, reputable vendors usually get back to you very quickly. They also typically have an extensive library of resources (a mix of documents to read and videos to watch) so you can try to fix the problem yourself.
Want to read about how a CRM system can help you stay ahead of customer expectations? Our visual graphic might be of interest, then. Click the button below to view the latest statistics!
On-premise system
This type of system is one that’s purpose-built by a company for their own usage and the data is stored in servers on business premises. Although cloud SaaS systems are extremely popular nowadays, on-premise alternatives are preferred by companies that handle very sensitive information.
Banks and government bodies, for example, would prefer to keep the management of their data in-house.
Pros of an on-premise system
- You have complete control over your data and system design - because your data is hosted on your own servers
- Design the system and update whenever you want - because you built the system, you have complete control over it. That means you can build a system that caters to every unique business process/challenge and update whenever you want
- Can comply with military-grade security standards - your server is in your company’s hands; it’s completely locked down and not shared. This can give greater peace of mind
- It may be more cost-effective if you have a large number of users - many vendors charge based on the number of users so if you have many, it might be more cost-effective in the long-run to build your own system
Cons of an on-premise system
- High system and equipment setup costs - if you’re building your own system, setup costs are typically quite high. You’ll need the appropriate hardware and software (including a backup server), plus a team to build it
- You’re responsible for all the maintenance - after the system’s built, you’ll need to think about its maintenance. For example, the servers will need to be stored in optimum conditions and you’ll need people to monitor the system and its performance
- You’re responsible for keeping up with updates - leading on from the above, you’ll need to keep an eye on performance and market trends which will indicate whether your systems will need to be patched or upgraded entirely
- Updates can be more complex and time-consuming - because your system is bespoke, updates can often be much more complex and take longer than the cloud alternative
- You’re responsible for creating a disaster recovery plan - every company should have one regardless but this is even more important if you have an on-premise system. You need a backup server far away from your primary server’s location and have a recovery plan in place in case of data loss caused by accidents, natural disasters or cyberattacks
- You’re responsible for data security - you’ll need to hire your own data security team to protect your systems 24/7. This can be quite expensive in comparison to the round-the-clock support you’d get as part of a contract with a cloud vendor
One of the biggest differences between cloud SaaS and on-premise is that how responsible you will be for the system's maintenance and data security. Let's use ERP as an example.
With an on-premise ERP system, you might have total control over data access but you're also completely responsible for keeping up with updates, maintenance and creating a robust security plan. Your IT team will need to be working round-the-clock to protect and maintain your systems.
Want to learn whether your current ERP system is the right platform for your business to thrive? Watch our on-demand webinar on the topic below...
So, which business system is better?
It might seem as though a cloud-based SaaS system is a better choice than an on-premise because there are more advantages for the former (and more disadvantages for the latter). However, it really just depends on what your business requires from a system and how that system fits into your existing processes.
Before choosing any type of business system, ask yourself these questions:
- How sensitive is the data that you’re handling?
- How important is security to your business and would you rather keep it in-house or entrust it to a third-party?
- Can you afford the upfront costs associated with building a business system in-house?
- Does the nature of your business require your processes and systems to be agile? Basically, would you need to upgrade regularly?
- Do you have the manpower and expertise to build a bespoke system?
- Do you have the manpower, expertise and infrastructure in place to maintain a bespoke system?
- How would your system fit into your existing processes?
These questions might help you figure out which system is better for your business.