Hosted vs SaaS Solutions: Which one should I choose?Make the right choice for your business
Editor’s Note: This article was originally published on 22nd March 2018, but has been updated as of the 20th January 2021 to provide the most relevant and up to date information.
The world is evolving, and the modern business needs to be prepared for a seismic shift in business practices. One of the impacts of the COVID-19 pandemic is the need to access your data from anywhere. This is more important than ever as your business may find itself under significant strain if not adequately prepared for the future. Upgrading your business management software may be one solution. The question you face is: should I host my servers in the cloud, or implement a full cloud-based Software as a Service (SaaS) solution? Whether you are looking to implement a new ERP solution or get more out of your existing on-premise software, it is important to understand the differences and benefits of each deployment option. Above all, the final choice depends on your business’ specific requirements.
On-Premise Software in the Modern World
On-premise solutions are entirely based within your physical location. They require server hardware, an operating system, and a database to store, manage, and retrieve your data securely and efficiently. To run an on-premise server, the hardware needs to be properly housed and maintained. The software also needs to be kept up to date, and your data needs to be backed up (and tested) regularly. These processes all incur their own individual costs which can vary over the life of your server. Failure to properly maintain your server can have disastrous results, from server downtime and the inability to work, to the loss of your data. However, when properly maintained, you have direct access and control of all aspects of your system. Unfortunately, as the entirety of your server is physically based on-site it is more difficult to access your system securely from outside of the office.
Businesses that require on-premise solutions typically:
- Require deep integration with other on-premise systems; having a physical, direct link to these other systems drastically improves speed, reliability and stability
- Struggle with poor internet connection, making cloud-based access less viable
- Have very specific functional requirements that a SaaS solution cannot fulfil
- Worry about the security concerns when hosting their critical and sensitive data in the cloud
- Already have a large investment in on-premise network infrastructure (e.g. servers)
- Can benefit by extending the functionality of their current system by using add-ons (even cloud-based add-ons, if your system has the right API)
A good example of an on-premise software package is MYOB Exo.
What is a Hosted Solution
If you are already using an on-premise ERP and want to get to the cloud there is the option to outsource the maintenance of their server and database, contracting a specialist company to do so. This alleviates the burden of having to look after a server yourself and shifts the associated costs and responsibilities to the contractor. The server is hosted in a data centre and is typically accessed through a Virtual Private Network (VPN). The hosting includes all of the peripheral services of an on-premise system and is typically bundled into a convenient monthly fee.
Businesses that chose a hosted solution typically:
- No longer wish to own or maintain their current servers
- Are happy with their current on-premise software but need to replace aging servers and find it more appropriate to instead outsource their requirements
- Prefer paying a regular monthly expense rather than incurring the capital expenditure costs
- Have a distributed network of users who need to access your data, combined with a poor internet connection at the current server location
- Are growing rapidly and need to be able to quickly scale up the hardware component of their solution – this is much more simply done when your servers are hosted by a 3rd party
With the COVID-19 induced need to work from home, many businesses are considering hosting their current solution. This allows out of office access to your system, without the costly and disruptive implementation of new software. Hosting an ERP such as MYOB Exo can be done quickly and effectively through ExoHosted – a system developed by Kilimanjaro Consulting.
What is Software as a Service (SaaS)?
Instead of hosting their servers and persisting with their current software, many businesses are finding that they are simply outgrowing the functionality of their system. These businesses typically look to implement a new SaaS software, that gives them the flexibility and scalability that they are looking for. A business will pay a monthly subscription just like the Hosted solution but be able to access their data securely via a web-browser like Google Chrome, or Firefox. In this situation the user does not purchase the software outright, which saves on the significant upfront cost of purchasing a new system.
Businesses that will choose a SaaS solution:
- Should have a reliable and fast internet connection
- Need to access their system from anywhere
- Do not want to invest in hardware, or deal with the associated costs
- Require mobility and access from multiple devices
- Do not require direct access to their database for integration purposes
- Are able to integrate with other cloud services through an API
An example of a SaaS package is MYOB Advanced, which is fully cloud-based and targeted towards larger, more complex businesses. Amazon Web Services hosts MYOB Advanced for all Australian and New Zealand clients.
How do I know which model is best for my business?
There are no hard and fast rules when it comes to choosing the best solution for your business. Any cloud migration requires careful planning and consideration but is worth it in the long run. Most importantly, the system you choose must meet the functional requirements of your business. Write a list of the requirements your system must provide before looking at the delivery mechanism. Then, compare this list with the functionality offered by the range of different solutions.
When working with an established, reliable partner like Kilimanjaro Consulting, our consultants will be able to recommend a suitable software solution.
If you are only just at the beginning of the ERP journey, download our free E-book that covers everything you need to know when choosing the right ERP for your business.
Which option is more cost effective?
Businesses starting from scratch will not have servers, server rooms, software or a network administrator to manage. They are usually too small to require such serious hardware, nor do they have the capital to invest in it. However, these costs will come with implementing an on-premise solution. As a result, a cloud-based option like MYOB Advanced or ExoHosted may be more attractive for new businesses, as there are no large hardware investments or maintenance costs.
However, if your business already has already implemented MYOB Exo, and is finding success with its on-premise solution, moving your data to a hosted server environment may be the more cost effective approach, as it saves on the implementation cost of a new ERP solution. Migrating your servers to a hosted setting is also much faster than implementing a new system, allowing you to maintain the most significant commodity that cannot be purchased – time.
- With the increased need to work from home, many businesses are looking to the cloud to gain offsite access to their data and become more efficient when outside the office.
- Hosting your servers in a data centre maintains your current business management software but gives you offsite access and removes the responsibility to manage and own the required hardware – instead, bundling it into a monthly subscription
- SaaS solutions are based in the cloud and require a monthly subscription. However, they require the implementation of a new software system and are usually better suited to more complex businesses.
- To understand what is best for your business, look at which software option better meets your needs before considering the delivery mechanism. A trusted implementation partner, like Kilimanjaro Consulting, can recommend the most appropriate software for your business.