Pricing Software: The On-premise vs. Cloud Battleground Explored
August 22, 2019
The Cloud has been a somewhat disruptive force, showing year-on-year growth
since its introduction. 90% of companies are already in the Cloud with 89% of companies using software as a service (SaaS). And it is estimated that 94% of workloads in 2021 will be processed by Cloud data centers.
But WHY? Do the benefits of Cloud computing really translate into business success metrics and are they relevant for all organizations? Are they worth the hassle and price tag? What about the security risks?
These questions have been around for a while, so let’s take a closer look at the battlefield to work out whether on-premise or Cloud software is the answer for your business.
Total Cost of Ownership
On-premise software usually requires a large upfront capital investment to cover hardware, server installation, storage, and the software itself. Then there are related costs to having your own server – space, power, cooling, maintenance, IT teams, and replacement parts.
Expensive or disruptive upgrades may leave you on older (and undersupported) 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!
The pay-as-you-go nature of SaaS platforms mean there are no hardware, maintenance or upgrade costs. There are no upfront costs to worry about so you can test out the power of the Cloud much sooner. 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).
An on-premise environment is run in house within the company’s own infrastructure by its own IT team, who manage its deployment, installations, training, upgrades, security and maintenance.
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.
A study by the Ponemon Institute shows that 79% of IT professionals consider Cloud applications and solutions to be important (or very important) to business operations today – a figure expected to rise to 87% over the next two years.
On-premise servers are not reliant on an Internet connection, so you’re never affected by a slow connection and your data resides locally for quick access. But you do have to be on a device with the software already installed to be able to access your data. If a device containing sensitive information was lost, it would have big implications. And if anything does go wrong with the server, you need the in-house expert on call.
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.
Cloud applications are available at anytime from anywhere with an Internet connection and via any device, with a 99% guaranteed up-time.
Scaling with an on-premise solution requires manual labor and typically requires buying and deploying new servers, which is both time-consuming and costly.
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.
Cost optimization 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.
According to Opsramp, 94% of companies expect to reduce infrastructure setup and maintenance costs, as well as reduce overall IT spending by moving to the Cloud – which might explain why 80% are expecting to spend more than 30% of their IT budgets on Cloud infrastructure in the next few years.
Data and Security
66% of organizations consider security to be the biggest challenge to Cloud.
An on-premise environment requires you to store 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 that is 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.
According to the The 2018 Global Cloud Data Security Study, though 75% of IT professionals say it is more complex to manage privacy and data protection regulations in Cloud environments than on premise, 39% feel their company’s total IT and data needs are met by Cloud resources and this is expected to increase to 51% over the next two years.
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.
All Things Said And Done
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, a longer deployment, difficulty scaling, and will have to own and maintain your own servers.
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 your current 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.