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Blue Link ERP, inventory management and accounting software

SaaS vs. On-Premises
Changing Deployment Methods


A white paper comparing and contrasting Cloud/Hosted/SaaS and On-Premise software deployment methods.

By David Silva

Blue Link Associates Ltd.


Executive Summary


After years of being merely a buzz term, SaaS (Software as a Service), has long since become a viable option as a software solution. As with most cutting edge technologies, SaaS threatens to change the competitive landscape of software systems. It is important for business owners to keep up to speed with changes in these systems that they rely on for their continued operations.

As globalization increases, so too does the need for remotely accessible systems and the ability to accomplish tasks on-the-go. SaaS stands as an enabling technology in a world where businesses continue to decentralize their systems and become more transactional in nature. These pressures combined have created a sudden push for systems that are quick to deploy, low-maintenance and easily accessible.

This white paper stands to examine SaaS as a viable alternative to on-premises deployment methods and provide managers with a summary of each method in order to determine an appropriate deployment method. In this white paper the SaaS model will be compared and contrasted with the on-premises method of deployment and typical pricing models explored.

SaaS is a great option for many businesses (particularly small businesses); however, just like everything else, it has its limitations as well as its advantages.


Table of Contents

  1. Executive Summary
  2. What is a SaaS/Cloud/Hosted solution?
  3. Pricing Models
  4. Advantages & Disadvantages
  5. How to choose: An Informational Chart
  6. Conclusion
  7. Appendix

What is a Hosted (SaaS) solution?


Cloud computing, SaaS and “hosted” have come to be used interchangeably over time. For the duration of this white paper, SaaS will be used to refer to the concept of both software-as-a-service and cloud computing that’s provided by a host organization (hosted). It will be used to describe a system whereby a client accesses the system off-premises via the internet and pays an on-going subscription (or rental) fee (see Appendix I for full description of differences).

Traditionally, business software has been installed on-location – typically referred to as “in-house” or “on-premises” – on a client-owned server. The software is then integrated with the client’s current software and various systems to allow for the flow of information from one system to another. SaaS, however, is different.

SaaS is an acronym for Software-as-a-Service and is used to describe a relatively new means of accessing software applications. The name is derived from the nature of the deployment method in which a host organization allows clients access to its software and charges for access like a service. Despite being around for more than 10 years, SaaS is seen as a relatively new technology in the business environment, which has exploded in popularity in recent years.

With SaaS, the software is no longer installed locally; it is instead hosted by the service organization/software provider. This means that the client organization need not install or run a server. Instead, information is sent through an interface to the host organization where it is processed by host-run software and sent back.

SaaS was originally used primarily as a deployment method for sales force automation and Customer Relationship Management but is now deployed for a variety of business functions including:

  1. Accounting
  2. Email access
  3. Enterprise Resource Planning
  4. Document management
  5. Service desk management

SaaS may be deployed via the web, or via the internet through a thin client. The primary characteristic of SaaS is that the software does not reside on the client’s premises meaning, inherently, that the software is accessed remotely and therefore can be accessed easily from anywhere. On-premises installations can also allow for remote access, however.


Pricing Models


On-premises system implementations typically require a substantial up-front investment in terms of licensing fees as well as hardware and installation services (data migration, employee training etc.) and on-going maintenance fees. Many of these costs must be incurred with SaaS implementations as well; however, on-premises solutions generally require a more significant initial commitment for software licenses. SaaS typically employs a number of different pricing models in order to lessen the immediate financial burden.

All costs considered, both SaaS and On-Premises solutions tend to cost the same in the long-run. The comparative long-term cost for each method will vary from vendor to vendor.

  1. Licensing (On-Premises)

    Licensing is the traditional approach for buying business software. This revenue model requires clients to pay a one-time fee to purchase licenses for the software. Typically maintenance fees are charged on a yearly-basis in order to obtain software updates and software support.

  2. Pay for Use

    Some software systems utilize a pay-for-use pricing model whereby clients are charged based on the amount they actually use the system. This can be measured based on the number of users accessing the system in a given period, the duration with which they use the service or even per transaction, event or other action performed within the system.

  3. Hosting/Subscription Fees

    The most common pricing model for SaaS ERP software is a recurring hosting/subscription fee. These fees are typically charged on a monthly basis, although some clients may opt to pay yearly, quarterly or according to some other defined interval.

Unlike on-premises implementations, SaaS pricing models tend to include maintenance and upgrade costs in the SaaS fees which can aid in budgeting for clients as they need only worry about a predictable monthly fee. These are not the only costs to consider, however. Other costs that are shared with both approaches include:

  1. Implementation costs
  2. Data migration
  3. Employee training
  4. Other consulting

There is no right answer when it comes to determining which deployment method is superior or cost-effective. Each method has its benefits as well as its detractors. Next is a table that summarizes the differences between SaaS and on-premises.


Advantages & Disadvantages


Software as a Service

   Advantages    Disadvantages
  • No large upfront cash outlay
  • Infrastructure costs pushed to provider
  • No more worrying about backups
  • Painless upgrades
  • Increases access to expert support (in lieu of an IT department)
  • Remotely accessible
  • Improved security and reliability
  • Possibly increased uptime
  • Immediate or quick access to a broad range of applications
  • Reduced control of systems
  • Data stored outside the organization
  • Internet connection required
Client does not own the software – leasing

 

On-Premises

   Advantages    Disadvantages
  • Data is stored inside the organization
  • Increased customization and control of systems
  • No monthly subscription fees
  • No internet connection required (required for remote access)
  • Hardware can be shared between other internal systems
  • Potentially easier to integrate with 3rd party applications
  • Client owns the software
  • Large initial investment
  • Hardware upgrades and maintenance required
  • In-house IT management required
  • Physical space required
  • Software upgrades must be handled on the client end
  • Less secure than most data centres

Hosted (SaaS) or On-Premises???Given the number of advantages and disadvantages for both deployment methods, it is clear to see that there is no obviously superior method. Determining which is best for a particular situation requires evaluating a number of factors including the level of unique business needs, the desire for flexibility and acceptance of risk. For example, small businesses may prefer a cloud solution because of their lack of on-site IT support — they may prefer the hands off approach of not having to maintain a server. Another factor to be taken into consideration is available cash flow. It is important to determine whether or not it suits one’s business to make a significant up-front investment or if it is beneficial to reduce the initial investment and instead pay for IT as a predictable monthly expenditure

Many software vendors only offer one method of deployment whereas others offer both. These vendors can offer assistance in determining the most befitting method to suit your unique business needs. Managers should ensure that they educate themselves in order to make an appropriate decision themselves instead of being pressured into one method or the other from those vendors that only offer one method. Below is a chart that can, at a glance, aid managers in determining an appropriate solution for their business.


How to Choose: An Informational Chart


 

SaaS

On-Premise

Company size

Small-medium

Medium-large (international)

IT skills

Basic or none

Advanced

IT Infrastructure

Basic or none

Well-established

IT Expenditure

Predictable monthly cashflow

Up-front long-term investment

Control

Less hardware control

Direct hardware control



Conclusion

Selecting and implementing a software system to run your organization is not an easy process and neither is the process of selecting a vendor or deployment method. Hopefully this white paper has helped identify the many factors that must be considered to help make this process easier. With SaaS now on the scene, managers are empowered with a choice in how they would like software help improve their business operations.


For more information visit www.BlueLinkERP.com
or call 1-877-258-5465 x 1 to speak with an expert

Blue Link offers Accounting & Inventory ERP Software
as both a SaaS and On-Premises solution.



Appendix

SaaS vs. Cloud Computing vs. Hosted

In order to understand the difference between SaaS and cloud computing – each with their own set of principles – they must be reduced to their simplest forms. In doing this it is possible to understand the difference as follows:

  1. Software-as-a-Service refers primarily to the payment method of accessing software whereby a client pays a vendor an on-going monthly or yearly fee for access.
  2. Cloud computing refers primarily to the physical location of the software system. With cloud computing the system is physically located off-premises and accessed via the “cloud” (internet).
  3. Hosted refers to the fact that the software provider is responsible for the software and the hardware it is installed on (hosting).

These terms have, over time, come to be used interchangeably. SaaS, in the context of this white paper, is used to essentially refer to all three simultaneously. It will be used to describe a system whereby a client accesses the system off-premises via the internet and pays an on-going subscription (or rental) fee where the software provider is hosting the software and hardware.

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