Currently, the two most common vehicles for delivering your software system are Software-as-a-Service and ‘On-Premise’. The focus of our blog this week is to provide guidance as to which of these options is best for your organization.
Before moving to the questions you should be asking yourself when making this decision, let’s first define SAAS and ‘On-Prem’.
SOFTWARE-AS-A-SERVICE (SAAS)
Software as a Service is a software licensing and delivery model in which software is licensed to a customer on a subscription basis. The software and associated hardware are ‘hosted’ by a vendor outside the customer organization. The customer is not responsible for installing or maintaining the software and hardware. (NOTE: SAAS is not
synonymous with cloud-computing. SAAS is, in fact, a sub-set of cloud computing, which has three components: SAAS, Infrastructure-as-a-Service (IAAS) and Platform-as-a-Service (PAAS).)
ON-PREMISE
An ‘On Premise’ delivery model has the software and associated hardware physically installed on the customer’s premises.
Now that we understand that one option is essentially the complete opposite of the other, let’s review the questions you should be asking in order to help you decide which way to go.
KEY QUESTIONS TO ASK
Listed below are some of the key questions you should ask when deciding between SAAS and ‘On-Prem’. This list is not exhaustive, but will provide a solid foundation for your decision:
- Do you have a mature IT Department? In order to be successful, the ‘On Prem’ option requires that your organization has sufficiently skilled IT resources so that installation and support of the software system can be efficiently delivered. If you do not have a sophisticated IT structure, perhaps the SAAS option would be a better fit, as the SAAS vendor is responsible for creation and support of your environment, as well as for any enhancements or upgrades that are required.
- Do you operate in a dynamic and/or highly-specialized business environment? If your business environment is fast-changing or has very specialized business processes, an on-prem system (over which you have complete control) may be more suitable. A SAAS solution – especially in a multi-tenant structure (where multiple customers exist in the same environment) – typically has a well-defined and fairly rigid release structure. As such, it is sometimes problematic to have the vendor address bugs or deliver enhancements on your schedule.
- Do you have a relatively short implementation time-frame? If your goal is to implement a system in fairly short-order, a SAAS solution – which has much of the solution ‘pre-configured’ and already has the technical infrastructure in place – can help you meet your aggressive timeline. An on-prem solution typically requires a much longer timeline to implement, as you will have to order your hardware, build your infrastructure, and design, configure and test your software.
- Do you prefer to defer the cost of your investment? If budget is tight in the near-future, choosing to go theSAAS route may allow you to still move forward quickly, as the bulk of SAAS costs (i.e. subscription fees) occur at go-live, or even later. With an on-prem solution, you begin incurring significant hardware and consulting costs almost immediately.
- How important is it for you to have a flexible, scalable environment? If you expect your user group and database size to grow quickly, SAAS more readily provides this flexibility. On the other hand, if you expect your environment to be fairly stable, the benefits of scalability are not as significant, and an on-prem solution may be suitable for your needs.
- How important is it that you have a highly-secure system? Because a SAAS vendor usually supports multiple customers, it is essential they have a highly-secure system. ( A significant security breach could be fatal to their business!) However, if you have the time, money and knowledge to build a solution which meets your needs, the on-prem option can deliver adequate security.
- Have you considered the accounting impacts of your decision? There are at least two accounting questions to consider when making the SAAS/on-prem decision: (1) if your existing system is on-prem, has it been fully depreciated?; (2) What are the opex/capex implications of one option versus the other?
- Can your data be stored in the cloud? Because of the nature of your business, and/or the governmental regulations which exist, you may be restricted about where your data can be located. If you are compelled to store your data locally, an on-prem solution may be your only option, as a SAAS solution may store your data in a different region, or even a different country.
SUMMARY
As with our earlier blog on whether an ERP or a Best-of-Breed solution is better for your organization, there is no easy way to define whether a SAAS or on-premise solution is right for you. Answering the questions above will provide some guidance, but the relative weighting of your responses will dramatically influence your decision. As always, the best piece of advice is…do your research!
