On-Premises, Hosted, and Cloud Software

There are three main ways that software can be implemented today – on premises, hosted, and cloud. There is a lot of hype with regard to the cloud right now and vendors are rushing to offer cloud software solutions. We have noticed that there can be some confusion from software salespeople in the sales process, especially when vendors say they offer “hosted” and “cloud” solutions. So, here are some specific definitions so you know what a vendor means when they talk to you about how their software can be implemented:

On-Premises – This is a traditional on-site implementation that runs on servers that you have in-house. This implementation is usually priced on a concurrent user basis where you pay a license fee up front and then an annual maintenance fee. This requires periodic upgrades to stay current on the software. However, the software license is yours and you can decide to remain on an older version for years if you so choose.

Hosted – In this scenario you actually buy and own the software license like you would in an on-premises setup, but in this case you outsource the servers and the maintenance of the application to a 3rd Party for a monthly or annual fee. Many software vendors that do not have a true cloud solution offer a hosted solution as an alternative. The key difference between hosted and cloud is that a hosted solution is a single instance environment in that you own the software license, and have full control including moving it off the host and bringing the software in-house at any time.

Cloud – True cloud solutions are multi-tenant meaning that many companies use the same instance of the software. You actually do not own the software license, but you rent or lease the software from the vendor – usually on a named user basis for a monthly fee. The software is maintained and upgraded by the software vendor, which frees you of much of the maintenance of the software. Plus, you do not have to maintain any technology except for a good internet connection to access the software. However, because you do not own the software, if you stop paying your monthly/annual fee, you will not have access to the system, so you will need to make sure you are current on your payments!

There are advantages and disadvantages with each of the scenarios listed above. As you go through the software evaluation process, we recommend that you review functional fit and clearly understand the benefits and drawbacks of each of the implementation scenarios so you can make the right decision for your situation.

Posted By: Spencer Arnesen

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