What’s the Difference: Excel vs. Cloud vs. On-Premise Pricing Software?
January 21st, 2021 (Updated 11/25/2022) | 13 min. read
By Duncan Hendy
A Pricing Software Comparison: Excel vs. On-Premise vs. Cloud
Are fancy pricing solutions worth the hassle and price tag? Does cloud computing really translate into business success metrics and are they relevant for all organizations? What about security risks? Life’s good in Excel, why change that?
These questions have been around for a while, so let’s take a closer look at the Excel vs. On-premise vs. Cloud software battleground and work out what’s best for your business.
Compared to obtaining any pricing-specific software, Excel is cheap as chips! It’s the fastest to set up and everyone already knows how to use it. It’s like a fast-food restaurant – the staff have basic skills and can afford little-to-no flexibility. You order off a rigid menu and can’t swap fries for rings. You have to take the gherkin because that’s how it comes and then you pay extra for ketchup.
But just as you’d question the quality and nutritional value of a $1 burger, so too should you consider whether your software is doing your data, your pricing experts, and your business justice.
Cost isn’t just about initial outlay, but the value it adds to processes, the efficiency it brings, the speed with which it delivers on expected results, the return it produces on investment, and the competitive edge it gives you as a company.
On-premise software is where you purchase the license for a piece of software but manage it all in-house.
It usually requires large upfront capital investment to cover hardware, server installation, storage and the software itself. Then there are ongoing related costs to having your own server, like space, power, cooling, maintenance, IT teams and replacement parts.
Besides which, you’ll be paying 20-22% of your perpetual license costs for maintenance. And then expensive or disruptive upgrades may leave you on older (and under-supported) versions of the software, a common issue shown to be highly cost inefficient.
And if you’re wanting to match the level of service you get from a cloud provider in terms of scalability and expertise, it’ll cost a pretty penny!
It’s is a bit like going to a fancy restaurant and paying for a “cook your own meal” experience. It includes the finest ingredients, equipment, gas, and water, but you’re the chef. Re-heating your meal costs extra, as does a larger-than-anticipated portion, despite the fact your partner has a smaller one.
The pay-as-you-go nature of SaaS (software as a service) platforms means there are no hardware, maintenance or upgrade costs! There is little upfront investment to worry about so you can test it out much easier and sooner than you could an on-premise solution. And once you’re there, you only pay for the resources you actually use. Nothing is wasted or becomes redundant and you’re always on the latest version of the software. Payments are regular and predictable, save for infrequent and invaluable on-the-fly scaling (see Scalability).
So, this restaurant is an all-you-can-eat buffet featuring every cuisine imaginable. Hot food is hot. Cold food is fresh. And they never run out of anything. In fact, every so often, a new dish appears. Love Indian food? Take more. Hate zucchini? Leave well alone. You pay each time you go up, but it’s by actual weight. If you take too much, you get a refund on your leftovers.
Cost optimization and right-sizing software is the main reason for cloud migration for 47% of enterprises. An exhaustive survey by TSO Logic found that 45% of existing virtual machines would run more efficiently in the cloud and that by right-sizing them (eradicating the over-provisioning found in 26% of inspected machines), cloud migration would result in a 36% saving over their current operating cost. This, in many cases, would cover the expense of the migration.
Efficiency and Agility
As you well know, it takes data from different people in various departments and multiple exchanges of files and ideas to create accurate pricing. Unless using Excel Online, data is usually shared via email – a method susceptible to multiple versions, inconsistent naming, and even incorrect data entry. All of which could lead to expensive mistakes! It is the antithesis of efficiency and the enemy of collaboration.
And as for agility, Excel spreadsheets were never designed for testing. In many cases, interrelated data is spread across files and folders, even geographical locations! Tracing the logic of formulae even just between cells can be time-consuming.
Besides which, spreadsheets can become highly personalized and what makes perfect sense to one user, may be incomprehensible to another. Anyone taking over from a leaving employee would then have to start from scratch.
So, everyone involved wastes precious time (that could be spent on profit-making activities) double-checking the integrity of data while collating and consolidating it into one version of the ‘truth’ that is meant to help guide company decisions. How do they do this? Why, copy and paste, of course. (Wait, isn’t that something from the 90s, like the VHS? Yes. Yes, it is.)
Well, let’s hope the human responsible doesn’t succumb to human error as they work. Nor build too large a document, else the whole program will slow right down. And that they are up on their spreadsheet-based data regulations and compliance….
An on-premise environment is run in-house within the company’s own infrastructure by its own IT team, who manage its deployment, installations, integrations, training, upgrades, security and maintenance. If that sounds like a lot of work… it is. Don’t expect them to be spending much time on anything else.
The system, once up and running (which can take longer than desired), will deliver on the efficiency tools you need. Workflows will be easier, collaboration clearer and everyone will suddenly be singing from the same sheet. Team efficiency rockets. Data is all in one place. And for the most part, you’re connected to your favorite third-party tools. (But if you or they perform an upgrade, integrations can go haywire.)
Alas, on-premise solutions aren’t built for agility. Testing and reacting to the market are slow and clunky – two words your competitors will smile about when they hear.
Cloud software is hosted on the premises of the vendor, with all maintenance, fixes and upgrades managed by them, freeing up thousands of dollars in hours your team could be putting to better profit-generating use.
Agility is built into the very nature of a cloud solution, supporting you in your own agile approach. A cloud-native vendor will be listening carefully to your feedback and requests, constantly making small but important updates in short implementation cycles that support you in reacting with lightning speed to the market and moving you closer to your profit goals.
Availability and Scalability
Unless using Excel Online, Excel is always available because you don’t need the Internet to access it and it’s super-fast to get into. But you do need a computer on which the software is installed. And your files, of course. Without those, you’re stuffed. Sure, perhaps someone in the office can send them to you, but do they have the latest version? And will you remember to replace it with this new copy once you’re back? And let’s not even ask the obvious question about data security—that’s still to come.
Scalability in Excel… um…what scalability?
Servers are not reliant on an Internet connection either, so you’re never affected by a slow connection and your data resides locally for quick access. But, again, you do have to be on a device with the software already installed, and if a device containing sensitive information was lost, it would have big implications. If anything does go wrong with the server, it’s your poor overworked in-house expert you have to call.
Scaling with an on-premise solution needs manual labor and typically requires buying and deploying new servers, which is both time-consuming and costly.
Cloud applications are available at any time from anywhere with an Internet connection and via any device, with a 99.9%-99.99% guaranteed uptime.
Scaling in the cloud is not only effortless (even automatic), but it is designed to be flexible. You can easily add or scale back licenses on the fly and only pay for what you actually use. That way, you’re ready when your latest video goes viral, but not stuck paying for that kind of demand for longer than you need to be.
A SysGroup survey found that one of the top reasons organizations are heading to the cloud is being able to access their data anytime from anywhere – considered vital to meet growing demands and for success in today’s flexible and global world.
You’re a data person. And Excel was indeed designed to keep data in small cells for clarity, comparison and analysis. But you’re not a dabbler in data, you’re a data devourer. You collect a vast amount of data because you know that data is king when it comes to your all-important pricing decisions. And you fill millions of those tiny little cells with data that you then have no time to update or historically analyze. All that wasted pricing potential!
Each time someone updates a file manually, there is a risk of errors that are hard to locate after the fact, and inconveniently, Excel rounds off very large numbers using imprecise calculations, which compromises accuracy. Both of which can negatively affect the bottom line. On average, a spreadsheet will contain one error per 20 cells.
As a standalone application, it’s not integrated with your other business intelligence systems, so not only is data siloed, but overall visibility is limited.
What’s more, data is more than likely managed by non-IT staff who aren’t familiar with data security and backup best practices. If disaster strikes, it can be impossible to make a full data recovery.
With on-premise pricing software, your data is all stored in one place that all your specialists and departments access and update, meaning they are all working from one truth. However, they have to be at a computer with the software installed (or use a VPN) to do anything.
An on-premise environment enables you to be in charge of storing all your data, which means you remain in full control of it and of what is happening to it, and you don’t have to send sensitive information through the Internet or have it stored in a data center you have no control over.
However, data security has to be managed in house, and is a very manual and expertise-essential process. Organizations handling extra-sensitive information (like banks) often choose this option so they are not reliant on third-party security measures – despite the cost and drawbacks of having to ensure heightened security and execute tedious patch management on their end.
The cloud comes with built-in security far beyond the affordability and capability of most businesses, combining multi-factor authentication with strong physical security measures that are certain to bring a higher standard of security than your in-house IT team. Nearly half of organizations employ security safeguards like encryption and multi-factor identification to protect sensitive data in the cloud.
Data backup processes are automated, making the process much easier and faster while also removing the potential for human error. And cloud-native vendors are equipped to prevent data loss (e.g., from power outages) and have good disaster recovery plans.
Cloud solution providers really serious about keeping your data safe will be ISO 27001 certified. They work to a framework of policies, procedures, and controls to protect your data – including financial, intellectual property, employee details, and information entrusted by third parties.
Gartner states that “Placing workloads in the Cloud does not require a security trade-off.” They predict that through 2020, public Cloud Infrastructure as a Service (IaaS) workloads will suffer at least 60% fewer security incidents than those in traditional data centers, and by 2022, 95% of cloud security failures will be the customer’s fault.
Aw! It’s so cute that Excel turned up for this category.
Traditionally, many businesses have used it for price management and to calculate optimum prices, so it most certainly has earned some merit. But in today’s competitive world, there is just no room for the vulnerabilities of the system nor the lack of capabilities.
For basic cost-plus pricing or discounts from lists, Excel will do the job. But advanced pricing strategies (like psychological, quantity-based, attribute-based and localized pricing) are all but impossible.
Do you really want to spend your time fighting against your technology, rather than have it support you in your pricing goals?
If you need customizable hardware or a purpose-built system and complete visibility and control over all your data and the security of it, then on-premise may still be your best bet. But you’ll have large upfront costs, longer deployment, difficulty scaling, and will have to own and maintain your own servers.
An on-premise pricing solution would definitely bring a lot of the sophistication you need to make a splash on the competitive scene, but the drawbacks to availability, in-house data responsibility, potential data siloes, long implementation cycles, and lack of agility make it a more time-consuming and ROI-sapping option when compared to a cloud-based solution.
If you’re looking for quick deployment, no hardware (or related) costs, software upkeep managed by the vendor, automated backups and recovery, easy scaling up and down, pay-as-you-go usage-based pricing, sophisticated security, and near-zero downtime risk, then cloud is the clear winner.
The key to moving your pricing software to the cloud is choosing a solution that has been cloud from day one – built to leverage everything the cloud has to offer and to scale elastically with your company’s needs.
With a cloud-native solution like Pricefx, you acquire cutting-edge machine learning that helps you turn your data into intelligent, automatic, and insight-driven pricing.
Getting you up and running up to four-times faster than other pricing solutions, all your upgrades are automatic so you’re always up to date, and our agile implementation cycles are designed to move you faster towards your profit goals while saving you countless IT hours and downtime.
Compared to on-premise annual maintenance costs, you’re looking at saving somewhere between $500K and $2M for a single platform with Pricefx.
And as an ISO 27001-certified company, it’s like storing your data in Gringotts.
Over to You …
I think my conclusion on this software comparison is crystal clear, but you know your business and have got to choose what’s best for you based on your actual requirements, skills, and budget.
So, let the facts (matched to your own personal requirements) speak for themselves.
And if you’re an SAP customer in search of a cloud-native pricing solution, check out our SAP endorsed app, Optimized Dynamic Pricing, available via the SAP App Center.