Cloud software vs. on-premise software: A deep dive

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By Guest
minute read ● January 21, 2019
Cloud software vs. on-premise software

Today, all organizations are looking for the agility and constant innovation required to meet the demands of a quickly transforming world. Cloud adoption seems to be a popular choice for businesses here. It has practically revolutionized the industry with its strategic and tactical advantages. According to the Gartner Report on Market Trends, organizations using cloud services are allocating 40% of their IT budget to cloud-related spending and 78% of these organizations planned to increase their spending on the cloud through 2017.

Cloud is on the rise and its adoption is spreading rapidly throughout the world especially in the small and mid-size markets. For example, businesses have adopted to cloud for ecommerce, accounts, HR or even managing sales. Now do you want to know why you are right to start with the cloud? Here we go on a deep dive into the various factors that will help you decide if cloud adoption is an intelligent choice.

Comparison between on-premise and cloud software:

  • The cost factor:
  1. Capital expenditure: One of the leading drivers of cloud adoption has been its drastic reduction in entry/upfront costs. Hardware, network architecture, and software licenses are costly to own for an organization and they recur every few years. This has indeed been a limitation for small and even mid-size organizations who earlier resorted to manual processes. The high capital expenditure is eliminated when we move to the cloud. Cloud software promises low costs with no hassles of installation, hardware, software, and license fees. Additionally you can decide to pay only for what you really need, the application, the technology stack or the computing infrastructure.

  2. Maintenance costs: There is a need for upgrades and maintenance now and then which increases costs in the case of on-premise software. Many organizations have an entire department of IT services to manage such software and its infrastructure. It has been predicted that its annual maintenance cost eats up 75% of the IT budget of an organization. Many organizations who are even ready to shell out these upfront costs are worried about maintenance as it increases their operating costs. When companies shift to the cloud, they save their IT budget for innovation rather than get bogged down by the maintenance cost of the software application.

  3. Pricing model: Cloud systems are usually based on a pay-as-you-go subscription pricing models. This makes it attractive to businesses as it considers utilization a key parameter for costs. Gartner estimated that a properly managed storage infrastructure has a server utilization of less than 15%. When you pay only for what you use, it brings down your operating costs considerably. This model has increased flexibility and opened up new technology solutions to smaller organizations as well. This is in stark contrast to on-premise software where you need to invest and commit upfront including for future growth and certain peak utilization periods.

  4. Updates and enhancements: In an on-premise software, these need to be requested for to the vendor and they come at an extra cost. With the cloud, there are auto updates and enhancements come at practically no cost to the user.

RELATED: The world is moving toward cloud computing. Are you?

The total cost of ownership of software by organizations (on-premise) includes capital expenses (on-premise hardware/software), operating expenses (services, support, and maintenance) and indirect costs (potential downtime and time to market delays). Cloud-based systems bring all these down to a very minimum and immensely improve flexibility and agility.

  • Accessibility: On-premise software limits access to systems with the software installed or to a company’s local network. Access outside these limits is restricted owing to significant investments on data centers, firewall, and security. Cloud offers a solution to work from anywhere, anytime and using any device. This aspect has triggered cloud adoption as it is a perfect cultural and technical fit to the world we live in today. With a dynamic millennial workforce generation, the industry demands that we constantly engage with employees, make information available in a single click, encourage virtual teams and provide a smooth user experience. So, with the cloud, it doesn’t matter where you are. If you have access to the internet, you have access to your software.

  • Real-time data: With this kind of accessibility, the cloud solutions often provide real-time data. This feature has improved businesses to a great extent, especially for people on the move as they can access information on the go. Dynamic work assignments, access to real-time information on orders, sales etc. are making business processes more efficient.

  • Scalability: The cloud is highly scalable, which means it can expand and shrink with your organization. Scaling your technical usage is instant, easy and automatic. However, with boxed software applications, you will need to be ready for significant investments in software and infrastructure if you are expanding your business. It’s also difficult to scale back once you’ve made the investment, as now your money is locked in, which is not the case when using cloud infrastructure.

  • Back-up and disaster recovery: When organizations own and maintain their own software and platforms, there is a need to follow stringent processes for everyday back-up and also to establish and follow strict disaster recovery operations. They need in-house guidelines, processes and a team to do this. With the shift to the cloud, these are is no longer the responsibility of the organization. Cloud service providers offer resilient, sophisticated systems with world-class backup and disaster management. This reduces the burden on the organization in terms of cost and effort.

  • Trials/Prototyping: Cloud offers free trials which allow rapid demonstrations and prototyping possible. This provides painless proof of concept and discovery phases to result in benefits for companies. Organizations can switch to a different vendor easily and are not locked in. However, on-premise software does not provide us with this advantage. If we decide to switch, the upfront capital expenditure is a sunken cost.

  • Quick deployment: Cloud-based software is deployed in a matter of hours/days over the internet and this reduces the time taken to realize its ROI. In comparison, on-premise software deployment is time-consuming and complex.

  • Employee engagement: Employees (the end users) of the organizations are also impacted by using cloud-based systems. High level of accessibility and user experience keeps the employee continuously engaged. The availability of employee service portals 24/7 via a mobile app, for example, has immensely improved processes, reduced workload, and improved employee relationships.

  • Go green with the cloud: Shifting to the cloud saves 80% of floor space required and 90% of power consumed. Paperless automation does, in fact, help you to serve your environment.

The key premise of cloud computing is that by moving to the cloud and automating processes, organizations can focus on making them more efficient. Innovation and productivity levels also improve as the time and effort required for administrative tasks fall. The cloud provider also manages operations faster, cheaper and smarter.

This time around, smaller organizations have become trendsetters by adopting the cloud at a rapid pace compared to larger organizations for its sheer benefits of cost reduction and flexibility. SMEs can now boost your business through greytHR’s exclusive partnership with Amazon. Know More.

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