On-premises vs. cloud software

Nowadays you don't have to install every program on your PC or laptop. Many applications are also – or only – available online, via the cloud. Anyone working with Google Docs or Microsoft 365, for example, is already using cloud software. This has clear advantages – but are cloud solutions always the better choice? We present the advantages and disadvantages of both possibilities.

If it ain’t broke, don’t fix it? Many users and companies have been accustomed to software on their own systems for decades and have never had any problems with it. You buy a product, install it on your home computer or office PC, and can work with it for several years. The advantage here is that you possess the software: Once you have bought the product, you can use the software without any limitations. There is only a one-time cost. But is that really the case? Especially in the corporate environment where you have to deal with different licenses, programs cannot be used for an infinite number of workstations. Each employee may have to purchase a separate license – or you may purchase multiple licenses in one package. The on-premises solution is therefore not that cheap.

Good software is constantly updated: Updates extend the functions of the program, improve its stability, and fix weaknesses. These updates need to be installed regularly by the users, which is additional work for them. In larger companies, especially, installing updates and bug fixes can be a considerable effort. In addition, the support doesn’t last forever. At a certain point, many software providers stop developing the old software in favour of a new product. Then you have two options: Either you continue to work with an outdated version or you invest in the new product.

However, another advantage must not be overlooked: All data remains with the user. While cloud solutions require the transmission of information to a remote server in a data centre, with on-premises software you can keep all data with you unless you decide to use cloud storage. As a user of on-site solutions, on the other hand, you have full control. You always decide for yourself how to handle the software.

With cloud computing and SaaS, users now have other ways to use software: Instead of buying the corresponding program, installing it on your own PC and then using it, you decide on a subscription. A provider hosts the software in a data centre and offers users access to it. Your own PC or laptop only establishes a connection via the browser, the actual computing power takes place in the data centre. Your own hardware therefore only needs to provide internet access.

Not only is the hardware maintained by qualified personnel, but also the software is always up to date. Updates are installed without the user needing to put in any additional effort and are available immediately. Since the software is independent from the PC, you can access the program from anywhere – you are neither limited to the device nor to the location. Without internet access, nothing works, which is a big disadvantage of cloud software. This can be particularly critical for professional users and companies: If the work suffers due to a poor internet connection, this is unacceptable.

Professional software can be expensive. Although on-premises solutions are usually paid for with a one-off purchase, it is not always possible for smaller companies and founders to make such a large investment. In addition, as the business and its requirements grow, the program you buy may not fit your needs after a while. With most SaaS providers, users can choose between a monthly or annual payment, allowing them to switch to a different product at relatively short notice. Additional functions or additional employee access can usually be booked easily and inexpensively.

Choosing cloud software means trusting the provider and allowing them to have the control. Trust is so important because sometimes very sensitive and business-related data is stored in the provider's data centres. If the cloud software manufacturer doesn’t take data protection seriously, the consequences could be catastrophic. Handing over control is also potentially problematic: If the provider decides to discontinue the offer or even to pause for maintenance work, this failure can have negative consequences for the users.

Software from the cloud does not necessarily differ in the functions it offers compared to when it’s installed on your own computer, but the two solutions still have considerable differences when it comes to other points.