SaaS vs. On-Premise-Software

Cloud Software on a computer

SaaS vs. on-premise – which is right for you? Choosing the appropriate software solution is crucial for companies to efficiently manage business processes. Specifically, we can differentiate between two types of implementation: Software-as-a-Service (SaaS) and on-premise solutions. Both approaches offer advantages and disadvantages that require careful consideration to make the best decision for your company.

In the case of SaaS applications, a vendor provides the software over the Internet, enabling businesses to utilize the software through a web browser or mobile app, without the need to handle the hardware or infrastructure themselves.

On the other hand, on-premise solutions necessitate the internal operation and management of the entire infrastructure, encompassing hardware and software. The software is locally installed on the company’s in-house servers or data centers, with data storage occurring on-site.


Determining the most suitable implementation type for your company depends on various factors, which we will now consider.

Table showing a comparison between SaaS and On-Premise software solutions

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Costs
  • SaaS: In most cases, SaaS applications are sold with subscription models, i.e. with monthly or annual payments. This usually includes the costs for hardware, administration and support.

  • On-Premise: There are high acquisition and implementation costs and also costs for the software and hardware, plus the IT staff and the ongoing license fees. In addition, there is an immense expenditure of time, which must be compensated accordingly.
Scalability
  • SaaS: With SaaS applications, the user can adapt and scale the software flexibly as required. Mostly, different subscription models are offered, which vary in their performance and scope.
  • On-Premise: To operate the software and expand it as necessary, the company must have the required infrastructure and capacity.
Adaptability
  • SaaS: Because adjustments and updates are carried out by the provider and the software is usually standardized, adaptations can be limited. In addition, unexpected changes or maintenance can disrupt the workflow.
  • On-Premise: It is possible to make modifications, depending on company-specific requirements,  to ensure optimal usability. This is because the control over data and software is up to the company itself.
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User-friendliness
  • SaaS: In most cases, SaaS applications are easy to use and do not require extensive introductions or training. They often have an intuitive user interface and can be accessed via the web browser or a mobile app.
  • On-Premise: On the other hand, on-premise solutions usually require technical know-how and extensive introductions to get the software implemented and updated.
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Data protection
  • SaaS: The company’s data is stored on an external server or in a cloud, which is located off-site. Therefore, the data is passed on to external service providers. However, in Germany, there is an obligation to comply with certain data protection guidelines so that users are protected in this regard. Nevertheless, it should also be ensured that the security measures are adequate.

  • On-Premise: The data are stored locally on the server or computer so that the information does not leave the company. However, it must be ensured that the internal IT department can guarantee data protection and has the necessary knowledge.
Maintenance and support
  • SaaS: The provider of the SaaS application takes over the maintenance and ensures that potential errors are corrected as quickly as possible and that everything is up to date.

  • On-Premise: Both the server and the software must be maintained at regular intervals by the internal IT department. Therefore, it is necessary to have sufficient competent staff with the appropriate knowledge and time resources. However, internal maintenance carries the risk of security gaps.
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Dependencies
  • SaaS: Users of SaaS applications are enormously dependent on their providers. In case of failures, there is no possibility to access the data or to fix the problems on their own.
  • On-Premise: On the other hand, the software is linked to a specific device. If this device is not functional anymore, the software and the personal data can no longer be used.
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Updates
  • SaaS: The software is constantly being developed and updates are made available on a regular basis. Thus, users always work with the latest version.

  • On-Premise: In the case of on-premise software, the user himself is responsible for carrying out updates.
Safety and compliance
  • SaaS: Both the provider and the user must take responsibility for the security of the data. While the provider must ensure that its processes and systems conform to the requirements, users can make sure that the provider includes strict security standards such as ISO 27001 or SOC2.

  • On-Premise: The responsibility only lies with the using company. Security measures must be implemented to avoid data losses and security problems. These include, for example, the implementation of firewall systems, access controls, encryption technologies and also regular backups.
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Operating and implementation time
  • SaaS: The software can be deployed quickly using SaaS solutions because it is hosted on cloud infrastructures. The implementation is very easy and can be done quickly so that the software can be used promptly.

  • On-Premise: On-premise applications usually require a long implementation time because the hardware has to be provided and the software has to be installed and configured.
Server
  • SaaS: SaaS applications have servers operated by a third-party provider in a cloud infrastructure. The company has no physical access to the servers directly, as they are located in the provider’s data centers.

  • On-Premise: In the case of on-premise solutions, the server is physically operated in the company itself and must be purchased to run the programs and store the data. It should be noted that the energy demand is enormously high if companies use their server.
Availability and flexibility
  • SaaS: Access is provided from various devices outside the corporate network, as long as there is an internet connection so that remote work is possible. Moreover, access to personal data is not limited to one device.

  • On-Premise: Most on-premise applications can also be used without an internet connection. Thus, users are not that dependent on a stable internet connection. However, personal data is limited to the device and is not shared in the cloud.
Integration
  • SaaS: SaaS providers often offer prebuilt integrations and APIs to facilitate the integration with other systems. This allows different applications to be linked together, data to be exchanged and work processes to be accelerated.

  • On-Premise: On-premise solutions usually offer more flexibility in integrating into existing systems. As the solution is installed directly on the company’s servers, it can be easier to integrate into existing processes and systems.
Reliability
  • SaaS: SaaS providers often have redundancy and disaster recovery measures in place to ensure that the application remains accessible in the case of server failures or other disruptions. This can lead to higher resilience compared to on-premise systems.
 
  • On-Premise: In the case of on-premise solutions, the company itself bears the responsibility for ensuring resilience. Companies have the option to contemplate the implementation of redundant systems and infrastructures to guarantee the availability of a backup in the event of a potential system failure. Furthermore, it is essential for companies to formulate a comprehensive disaster recovery plan encompassing measures to restore data and systems in the event of a major failure. To detect potential failures or performance issues at an early stage, it is advisable to establish monitoring systems. It becomes evident that the resilience of on-premise solutions heavily relies on the company’s implementation, commitment, and existing expertise.
Future potential
  • SaaS: In terms of technological development, SaaS solutions are significantly better positioned to benefit from technological advances. The trend of recent years shows an increased acceptance and use of SaaS applications, especially due to the flexibility and scalability of these solutions.
 
  • On-Premise: On-premise solutions tend to have slower reaction times to technical changes because they require manual updates. As a result, they may not always stay up to date. However, given the constant evolution of technical conditions, many companies opt for SaaS applications to ensure that they remain current within the company without the need for time-consuming adjustments. Despite the strong trend towards SaaS applications, there are still companies that continue to utilize on-premise software, particularly due to the significant factor of data security and compliance.
A comparison between the advantages of SaaS and On-Premise
A comparison between the disadvantages of SaaS and On-Premise

Which solution suits you best? There is no definitive “right” or “wrong” solution. Instead, the decision relies on a variety of factors that can vary for each company and its specific requirements. To conclude, you should acquaint yourself with the features and evaluate which aspects are pertinent to your business requirements.

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