Understanding Cloud, SaaS & On-premise hosting

April 16th, 2016

If you’re finding all the latest IT deployment options just a bit confusing, you’re not alone.

Many businesses struggle to understand which option is the best for them in the rapidly changing technology landscape. A quick Google search produces a raft of confusing and often conflicting articles on the three main deployment options for business software; on-premise, cloud hosting or Software as a Service. The short answer is, there is no best option for software licensing and deployment, but there is choice. It all comes down to what your business is trying to achieve along with the resources and budget available; the trick is to know what your options are. We want to make it easier, so we’ve set out some (hopefully) straight forward definitions of the three main deployment options available for ERP software and other business management systems. 

Functionality First

The most important decision you’re going to make is around the functionality of the software you’re choosing to use. Finding something that is going to drive the incremental business improvements you’re looking for will be your first concern. But you do need to make absolutely certain that the functionality you want is able to be cost-effectively delivered based on the licensing and deployment choices you make. We say there is no “best option” and there should be no difference in the functionality delivered but depending on your business circumstances there is likely to be a best option for you. 

Licence to use

However you licence your business software, we believe you should have the choice of hosting it on-premise (with a physical server) or in the Cloud. This puts us at odds with a number of vendors who simply don’t give you a choice. They only have one option and do everything in their power to make it appear as though it is the only option you should consider. It is not in their interest to give you a clear picture, in fact it would seem that the more confusion there is out there, the better. 

So what choices should you have to make?

Traditionally the most popular way to purchase ERP software is to pay for it up front. Under this arrangement you will have a perpetual licence to use the software (yours to use forever) and have the option of paying annual maintenance and support fees along with any costs to configure, customise or support the software. An increasingly popular option is to rent the software on a monthly or annual basis and this is where some of the confusion starts to come in. You can pay a rental fee and host the software as you would a perpetual licence, with the maintenance, service and other fees paid for separately. Or you can opt to rent it on a Software as a Service subscription which bundles all of your hosting, maintenance and a range of other fees into the one monthly or annual fee. 

Deployment: the same but different

The next round of choice comes with how your software is deployed. People often think of SaaS and Cloud deployment as the same thing, but you can host your software in the Cloud without it being SaaS. There is also a lot of confusion generally around how software is hosted, how it is accessed and what that actually means. So let’s get down to some basics:

  •  On-premise is the traditional way to manage business data and systems, and remains one of the most popular hosting method for ERP software globally. You set up your own internal system with all the hardware and software run on site. In the majority of cases you will own a licence to use the software and have purchased the hardware outright, but as we discussed above, it is entirely possible to rent the software (and the hardware if you wish) and deploy it on-premise. You don’t even have to physically host it on your premises. Some systems have their software on the premises of a third-party provider and access it via a browser interface. Which raises another point of confusion. Cloud doesn’t mean mobile. You can have mobile access to software that is physically hosted on your premises via a browser; it acts just like Cloud hosted software accessed via the browser. So just because your sales team say they need mobile access, it doesn’t mean you have to choose Cloud-hosting for your ERP software. Companies choose on-premise hosting for a variety of reasons; some have already made a significant investment in hardware or IT resources, for others there are risk-management or compliance considerations. Once it was the only viable option but in the last decade that has significantly changed. 
  • Cloud computing offers IT hosting that isn’t connected to a specific location. Your software is hosted on virtual servers and as a business you store and access your data or programs over the internet. Just as for on-premise you can host software that you own a perpetual licence for, or software you are renting. You can also choose to host it in your own Cloud or in a hosted Cloud environment which is managed for you. Whichever option you choose, these days Cloud-hosted software should perform just as well (and in some cases, better) than your on-premise software. It should have robust security in place and be able to support high volumes of transactions and the large databases that ERP software requires. The only real difference is that for on-premise your software is hosted on physical servers that you can see and touch; in the Cloud the servers are virtual. When you choose Cloud-hosting, you will still need separate software maintenance, support, and help with customisation or configuration. Generally, these services will come via your software provider, not the organisation that provides your Cloud hosting. Upgrading the software and managing any customisations or upgrades is ultimately your responsibility, just as it is when you’re hosting on-premise. Cloud-hosted ERP software has become increasingly popular with organisations that are working out of multiple offices, in multiple locations, and often across several countries. It doesn’t require ongoing investment in server hardware or a dedicated It team to support it. 
  • SaaS stands for ‘Software as a Service’. That is, any software application or bundle of applications your company uses that is licensed under a monthly subscription in its entirety; software, hardware, maintenance, upgrades, security, back-up and anything else you need is generally included in the one payment. While SaaS is almost 100% Cloud hosted there is no reason why it has to be and some providers do offer SaaS hosted on-premise. However, as it is largely Cloud-hosted and you don’t need to buy or maintain hardware, SaaS is a great way to manage all the aspects of your business without having to make an upfront investment in hardware or software. You are also dealing with one provider for all aspects of the software deployment, as opposed to several different providers, so the monthly payments can be easier to manage. SaaS is also generally sold as a user-based subscription – so you only pay for what each user needs in a month. This means you can add users and subtract them with relative ease making it highly cost-effective for businesses that are growing rapidly or have fluctuating staff numbers. One thing to look out for is that many providers ask for an upfront commitment; this can lock you in to making payments for anything from a few months to a few years and can significantly diminish the flexibility you think you’ve bought into. Like any contractual arrangement you need to be certain of what you’re getting into, so be sure to read any small print thoroughly. SaaS in the ERP software and business management space has grown rapidly over the last few years. Greentree has been delivering industry specific SaaS solutions for nearly a decade, but it is only recently that we believe the Cloud infrastructure has developed to be able to support a full ERP SaaS solution of any real scale. It’s exciting for our customers, as it gives them another choice in the way they run their business. 

Complex choices in a charging environment

It’s great to have more options, but it does make it harder to make business decisions. While on paper you can choose almost anything, you need to consider your business’s size, complexity, company culture, and acceptance of change. You’ll need to think about the infrastructure and resources you have in place already, and your needs in the future. For anyone weighing up the options, some professional advice is going to go a long way. Get in touch and we can give you the information you need to make an informed decision. Credit to the talented bloggers at Greentree - See more at: If you are interested in hearing more about Greentree and how we can help, contact us today.</https:></https:>