What is the cost benefit of SaaS vs On-Premise Software

What is the cost benefit of SaaS vs On-Premise Software

cost benefit of SaaS vs On-Premise Software

What is the cost benefit of SaaS vs On-Premise software

In this article we look to highlight the cost benefit of SaaS vs On-premise software. The digital revolution has driven  many businesses to analyze and improve on their technological resources. A common question our clients ask is, “Is my current software solution the best fit for my specific business needs?”. As with all resources in a business, managing your resources effectively is critical. Management must consider the upfront, short term (1-3 years) and long term (5+ years) cost implications.

An ROI calculation is a must, allowing management to gauge the expected value from changing or upgrading their software. When considering a software solution, flexibility is key in whichever software program you select. We advise our clients to always try and reach their clients in the most natural way possible. A common challenge faced by our clients is the selection of a software delivery model. The 2 most commonly used options is to have an on-premise software (often shortened to on-prem) or a software as a service (SaaS.)


What is Saas?

Saas is a software subscription model where, ultimately you pay as you use. The delivery model aims to improve efficiency, enhance customer experience and reduce costs. To most customers, where their data is stored is not as important (On-premise or Cloud). What matters, is the user experience (UX). SaaS promises to deliver the best experience possible, but is it really more cost-effective? Does the delivery model offer more than a traditional On-Premise model?

SaaS is hosted and maintained by a 3rd party provider. This allows you to focus your resources on the business operations and not on maintaining and upgrading the software. Thus saving you time and money, and allowing you to focus on improving your customer’s experience. There are disadvantages, one being limited access to the backend of your software. This can be a deal breaker for businesses that want complete control over their data and are restricted by compliance requirements.

What is On-Premise Software delivery Model?

On Premise software is installed and runs on an internal infrastructure of computers owned by the organization itself. Unlike SaaS there is no remote facility such as a server farm or cloud. On-premises software is sometimes referred to as “shrink-wrap” software. It is established within the organization’s internal system, with the hardware and other infrastructure necessary for the software to function.

There are several costs incurred until a software and its services would be fully available for use. The construction of on-premises software within the organization requires high initial costs. This includes costs incurred for the purchase of hardware and other infrastructures as well as costs required for software installation and examination.

Additionally, the organization is required to purchase the license particular to the software. This involves upfront costs and time for the preparation and required procedures. In order to maintain software functionality, sustainable maintenance and operations is also required. The costs incurred for maintenance and operations of the system will form part of the organizations overhead expenses. The entity using on-premises software is also responsible for backup and storage of software data. This implies the ability of the entity to have a full control over its data and its security.

Advantages of SaaS vs On-Premise software

A large number of businesses, including small and medium businesses find renting software a more cost-effective solution than having to purchase and maintain everything themselves. SaaS was once something exclusively used by enterprises. But the technology has leveled the playing field and now small and medium businesses can also take advantage of the technologies, tools and raw processing power SaaS has to offer. Compared to traditional installable software, SaaS provides some distinct advantages including:

Cost of SaaS vs On-Premise software

SaaS has proven to be the most efficient way to manage data from a cost perspective as there is little to no infrastructure costs or license fee’s involved. The subscription model prices make it affordable as businesses are able to customize and build their platform to their unique specifications, ensuring they only pay for what they are using. A further saving can be made if using a shared environment. This maximizes possible usage without increasing cost

SaaS Security benefits vs On-Premise software

Whilst On-Premise software has traditionally been the most secure way to host private information. It must be said that the regulations and compliance  However, SaaS follows compliance regulations and protects data from the inside out. Data is backed up both in the cloud and by the user, providing an added layer of security and reducing downtime in case of emergency.

SaaS Adaptability vs On-Premise software

SaaS models offer unique flexibility and adaptability to a clients specific needs. It allows you to only pay for the product when and if required. Systems can be custom built to put your business in a perfect position for growth. Payment plans can also be diverse and customized depending on the various requirements and financial situations of each business. As customers can usually sign up for and cancel subscriptions easily, they can start or stop using a service based on their goals. They can also downgrade or upgrade services to gain different features as needed.

SaaS Scalability and integration vs On-Premise software

As SaaS solutions are cloud based, the environment can be scaled up or down based on your business specific needs. It is also common for SaaS solutions to be integrated with other SaaS solutions. Comparing this to a traditional model, there is no more a need to purchase other servers or software. As this is a subscription model, you only need to upgrade to an offering in terms of server capacity which is still owned, managed and maintained by the SaaS provider.

New Releases

SaaS providers upgrade their solutions on a continuous basis. These upgrades are made available to their customers with lower cost implications than a traditional model. The days of being forced to spend large sums of your budget on purchasing the latest version of a software are a thing of the past. These updates also allow your business to continuously improve workflows and streamline your business processes.


Having considered the benefits of SaaS vs On-premise software models, it is safe to say that the SaaS models offers greater versatility than an On-Premise system. It also offers greater scalability and removes the hassle of an organization having to maintain and upgrade their infrastructure.


Learn more about the benefits of periodically reviewing your existing ERP solution

What is the cost benefit of SaaS vs On-Premise Software

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Disclosure: Some of the links in this article may be affiliate links, which can provide compensation to me at no cost to you if you decide to purchase a paid plan. These are products I’ve personally used and stand behind. This site is not intended to provide financial advice and is for entertainment only. You can read our affiliate disclosure in our privacy policy.

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