SaaS vs. On-Premises Software

Software is an essential part of any modern business but choosing the right software solution can be challenging. There are many factors to consider, such as cost, functionality, security, scalability, customization and maintenance. One of the most important decisions is choosing between Software as a Service (SaaS) or on-premises software.

SaaS is a software delivery model that enables end users to access applications and data through an internet browser. SaaS vendors host and manage the software and the data on their servers and you pay a subscription fee to access the service. Some examples of popular SaaS products are Salesforce, Netflix, Slack and Zoom.

On-premises software is a traditional software model that requires you to install and run the software on your own hardware and servers. You must purchase a perpetual software license, build and maintain the hosting infrastructure, recruit/hire/retain IT staff to manage the software and the infrastructure and cover all the associated costs. 

There are benefits to both SaaS and on-premises software, depending on the needs of your organization.

What is SaaS?

SaaS ERP solutions can be accessed from anywhere with an internet connection, making it easier for businesses to manage their operations remotely or on the go. This feature particularly benefits companies with multiple locations, remote workers or mobile employees. SaaS ERP solutions also offer lower upfront costs, faster implementation, automatic updates and scalability. These advantages are especially appealing for small and medium-sized businesses that do not have large IT budgets or staff or that need to adapt quickly to changing market conditions.

SaaS offers five key advantages over on-premises software, including:

1. Cost-effectiveness: One of the major advantages of SaaS is its cost-effectiveness. Unlike on-premises software, SaaS eliminates the need for upfront hardware investments and infrastructure costs. With SaaS, you can simply pay a subscription fee based on your usage. This makes it more affordable for you, as you can avoid large upfront expenses and instead have predictable monthly costs.
2. Scalability and flexibility: SaaS offers you the ability to scale your software solutions quickly and easily. As you grow or your needs change, you can simply upgrade your subscription to accommodate the increased demand. On-premises software, on the other hand, often requires additional hardware and infrastructure investments to scale, which can be time-consuming and costly. SaaS also provides you with flexibility in terms of access, as it can be accessed from any device with an internet connection, allowing for remote work and collaboration.
3. Easy maintenance and updates: With SaaS, the responsibility of software maintenance and updates lies with the provider. This means that you don’t have to worry about installing patches or updates yourself. Additionally, SaaS providers often have dedicated teams that monitor and address any issues that may arise, ensuring a smooth and hassle-free experience for you. On-premises software, on the other hand, requires you to allocate resources and time for maintenance, updates and troubleshooting.
4. Enhanced security: SaaS providers prioritize security and invest in robust infrastructure to protect your data. They often have multiple layers of security measures in place, including encryption, firewalls and regular security audits. This can provide peace of mind, knowing that your data is being secured with the latest technology and managed by cloud security experts. On-premises software, although it can be secured, may require additional investments and expertise to ensure the same level of security.
5. Continuous innovation: SaaS providers are constantly striving to improve their offerings and stay ahead of the competition. This means you can benefit from continuous feature updates, new functionalities and access to the latest technologies. On-premises software, on the other hand, often requires you to invest in upgrades or new versions to access new features, which can be a time-consuming and costly process. 

In addition to these general benefits, SaaS also offers you a number of specific benefits for different types of businesses. For example, SaaS Customer Relationship Management (CRM) applications can help you improve your sales and customer service processes. While SaaS Enterprise Resource Planning (ERP) applications can help you manage your finances, inventory and operations more efficiently. Overall, SaaS software offers you several benefits that can help you improve your efficiency, productivity and profitability.

Top 6 Benefits of SaaS

SaaS ERP solutions are not suitable for every type of business. Some businesses may prefer more control, customization, integration and security over their ERP system, which are usually better provided by on-premises ERP solutions. These businesses may include larger, more complex or highly regulated organizations that have very specific or unique requirements.

On-premises software has several benefits over SaaS. Depending on your organization's requirements, the following advantages of on-premises software should be considered:

1. Limited data access: With on-premises software, your data is stored locally on your own servers, giving you full control over its location and availability. This can be particularly important if you handle sensitive or confidential information. You can implement custom security measures and protocols to ensure that your data is protected to your required standard.
2. No dependency on internet connectivity: On-premises does not require Internet connectivity in order to access your data. This means that even if you experience internet outages or have limited access to the internet, access to your data is still available.
3. No subscription: On-premises software typically involves upfront investment for software licenses and infrastructure. While there may be additional costs associated with maintenance and support, you won't have to budget for ongoing software subscription fees. 

There is no definitive answer to which software model is better for your business, as it depends on your needs, goals, budget and preferences. The best way to decide whether to use SaaS or on-premises software is to consider the specific needs of your company. Some factors to consider include:

• Budget: SaaS applications typically have a lower total cost of ownership (TCO) than on-premises software. If you have a limited budget or want to avoid large upfront costs, SaaS may be a better option for you. If you have a large budget and can employ cloud and security experts, on-premises may be more suitable for you. SaaS pricing models are often more flexible and adaptable, allowing businesses to pay only for what they use and adjust their plans as needed.
• Scalability: SaaS applications are highly scalable, meaning that businesses can deploy more storage capacity and redundancy and user licenses as needed. On-premises software is less scalable and it can be more expensive to add new licenses, storage and redundancy. If you expect rapid growth or frequent changes in your business demand, SaaS may be more scalable. 
• Accessibility: SaaS applications can be accessed from anywhere with an internet connection. On-premises software can only be accessed from within the company's network.
• Backup and redundancy: SaaS backup solutions can help ensure business continuity and preparedness in a disaster or outage. SaaS backup solutions also can help safeguard your data and recover granular items in case of accidental or malicious deletion, corruption, or ransomware attacks.
• Security: SaaS providers invest heavily in security and their applications are hosted in widely used, secure data centers and managed by cloud and security experts. On-premises software security depends on your IT infrastructure and personnel. If you handle sensitive or confidential data that requires additional levels of security and compliance, on-premises delivery may be a more suitable option for you. Always ask your vendor for proof of their security and compliance claims.

Many organizations find SaaS ERP to have a stronger business case. This is particularly true for those who want quick implementation, lower upfront costs, less reliance on an internal IT team and easier scalability. These companies also recognize that top software providers are highly skilled in cybersecurity and can provide superior data protection compared to what they could achieve independently. In addition to the major considerations listed above, there are several other factors to consider when choosing between SaaS and on-premises software, such as:

• Deployment time: SaaS applications can typically be deployed more quickly than on-premises software. This is because SaaS providers handle all of the hosting and maintenance of the software.
• Training and support: SaaS providers typically offer more training and support than on-premises software vendors. This can be important for businesses that do not have their own IT staff.
• Security & compliance support: Choosing the right SaaS provider can benefit you with the value of reducing your compliance responsibilities through inherited and shared security controls.
• Backup & redundancy: Moving your data and processes to the cloud can offer additional peace of mind in knowing that if and when disaster strikes, your data will never be lost.
• Integrations: SaaS applications are typically easier to integrate with other SaaS applications and on-premises software.

It is important to note that there is no one-size-fits-all answer to the question of whether SaaS or on-premises software is better. SaaS and on-premises software offer different ways to deliver and use software solutions for your business. Each has its pros and cons that require careful consideration. The best choice depends on your situation and preferences.

When considering SaaS software, prioritize vendors with a solid reputation and a track record of reliability and security. Ensure the chosen SaaS application meets your specific needs. Develop a plan for migrating your data and applications to the cloud.

Related articles:

• Software as a Service: The Small Business Game Changer
• 10 Key Questions to Ask a SaaS ERP Provider
• Reduce Your Total Cost of Ownership by Migrating to the Cloud

Deltek’s industry-specific SaaS solutions are designed for project-based businesses, such as architecture, government contracting, engineering and professional services firms.

Deltek’s SaaS solutions help businesses manage the complete project lifecycle, from winning new business to executing and delivering successful projects. By choosing Deltek Software as a Service, businesses can improve their efficiency, productivity and profitability.