Which is better? SaaS or On-premises software

October 20, 2014
Procurement, MARKETDOJO, ESOURCING, SAAS, ON PREMISE
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When we started working on Market Dojo, we decided early on that we would use the SaaS model. This was an obvious choice for us, and has helped us and our customers throughout our history. Because we often get asked about this, I wanted to share the reasons for our decision in a bit more detail.

Google Trends – comparing interest in SaaS, Enterprise Software and On-Premises search terms.

History
Over the last 15 years, enterprise software has undergone a radical shift. In the 1990’s, customers would usually install software on their own servers. Today it is now usually hosted by the application provider, and delivered over the Internet. For a more detailed definition of the two terms – see Wikipedia articles on On-premises Software, and SaaS.

So what are the benefits of SaaS?

Running Costs
Running and support costs are lower, in all except the largest on-premises implementations. This is because all clients share the cost of servers and operations staff. On-premises software would duplicate these costs for each installation.

Time / cost to implement
Implementation for SaaS software is almost always much faster than for on-premises.
Staff must install an on-premises solution at the customers data centre and integrate it with an existing IT infrastructure.

In the case of Market Dojo a new customer can enroll themselves and setting up licences can be done in a few minutes.  Here’s an earlier blog post of our’s that shows how you can set up your organisation and be fully operational in 21 minutes.

Support cost and time to resolve issues
Support is simpler, as access to log files and identical system environment is available to the support team. This leads to a cost reduction and also to faster resolution of issues.

Contract length / agility
Because of the reduction in time and cost to install, SaaS vendors can be offer shorter contracts. It also means that they can add or remove users faster. Market Dojo can be purchased on a month by month basis with no minimum contract length.

New versions
New versions are immediately available to all users, without the need to be installed on customer systems.

Maintenance
On-premises solutions tend to be bespoke to each customer. This increases the maintenance costs and ability to roll out new features.  A SaaS application usually has only one version, which means these issues do not arise.

Software costs
Due to all the efficiencies that come from true multi-tenanted SaaS applications software companies can supply their SaaS solutions at a much lower cost than on-premises applications.

So why isn’t everything SaaS?
Great question!

There are some good reasons why not everything is SaaS. SaaS (as it exists today) is a newer concept, so some older software solutions are on-premises for historical reasons.
There are applications which are not so well-suited to a SaaS. Video editing software involves processing huge volumes of data, and is often done more efficiently on a powerful workstation, rather than across a network. This may change as technology improves.

For some classes of applications (e.g. Bank Networks) the risks may outweigh the benefits.
Here are some points that a buyer should consider when evaluating a SaaS product.

Data Security
Data security is a key issue with SaaS software. It has made the headlines due to events such as revelations about the US Government PRISM programme. These are valid concerns. SaaS companies are taking steps to secure their products from these risks, but a wise buyer would consider this point.

System availability
SaaS solutions usually have less downtime than those hosted on-premises, but relying on external vendors is a risk which should be considered.

Dependence on high-speed internet
SaaS applications depend on an internet connection to function. Several factors will affect actual network requirements. These include number of users, type of application, level of interaction.

Conclusion
We believe that most enterprise software is moving to the SaaS model because the benefits of this approach outweigh the disadvantages.

The preferred architecture for computing has swung like a pendulum between a centralised and distributed approach. In the 1970’s a mainframe computer with many dumb terminals was state of the art. In the 1990’s a distributed, client-server model ruled the roost. Long term, we cannot be sure if the pendulum has settled or will swing again. Will current innovations such as MS Office 365, Amazon AWS and Google Chromebook continue? Will the end of Moores law and the Internet of Things give rise to new and better tools and usher in a return to a more distributed model?

Unfortunately, we don’t have a crystal ball*. However, we do believe that, in the short and medium term, at least, SaaS will be the preferred choice for most applications.

*For more information about the Moores Law and accelerating technology, these links are a great place to start:
https://www.ted.com/talks/ray_kurzweil_on_how_technology_will_transform_us
https://www.youtube.com/watch?v=E9wFXHYJgdo

About: Market Dojo provides accessible eSourcing software. Find out more atwww.marketdojo.com

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