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Market trends

What is an On-Premises software solution?

With all the talk about cloud-based Software as a Service (SaaS) solutions, it's easy to lose sight of the fact that on-premise (on-prem) software still plays an essential role in many companies.

Written by Asolvi
Market Trends, IT Equipment

When Is On-Premise Software a Viable Option for Businesses?

With all the talk about cloud-based Software as a Service (SaaS) solutions, it's easy to lose sight of the fact that on-premise (on-prem) software still plays an essential role in many companies. This article takes a look at why some businesses are bucking the global IT trend by choosing to maintain or buy new on-prem software—and how they are utilising it to power their business-critical services.

If you’ve read the commentaries and predictions on IT spending by most of the big analyst houses, you could be forgiven for thinking that on-prem software has already been consigned to the past. But this is not true. In one high-profile example, Dropbox scrapped its AWS architecture in favour of an on-prem approach, citing the need for more flexibly to test, develop and scale its IT environmenti. These are benefits that most people would typically attribute to SaaS solutions, and it shows that companies don’t necessarily have to select cloud-based technology to achieve their long-term goals.

It’s also easy to assume that all on-prem software is part of a company’s legacy infrastructure. But this is over-simplifying things. For example, the majority of Oracle’s database solutions are on-prem, yet they’re still used by the world’s top banks, retailers and utility companiesii. Furthermore, just because software is referred to as ‘legacy’ doesn’t mean it’s end-of-life. Quite often there's a considerable investment behind on-prem software, and it remains relevant and functional—despite its age. The UK’s banking sector, for example, still runs on AS/400 servers and requires specialist DOS programmers.

On-Prem and Total Cost of Ownership (TCO)

Before you buy new on-prem software, it's vital to get a clear picture of the Total Cost of Ownership (TCO). The initial outlay is straight-forward and obvious, but you should also factor in the cost of:

  • In-house servers and any supporting hardware
  • Backup and recovery infrastructure
  • Monthly on-prem software license fees for onboarding and specialist support
  • In-house software maintenance—including version control and manual updates
  • Security and data protection infrastructure
  • IT support (potentially on a 24/7 basis) to manage and maintain each of the above.

Depending on the sector in which you operate and client requirements, the TCO may well be acceptable and justifiable, and the benefits offered by on-prem may outweigh any potential pain-points.

Understanding the Benefits of On-Prem

Compatible with Air-Gapped networks

Companies working in the defence sector or providing services that relate directly to national security have to meet extremely rigorous IT security standards—and with good reason. Businesses with MoD contracts, for example, may be required to Air Gap their network. This approach ensures a company’s IT infrastructure is physically isolated from potentially unsecure network components—including the public Internet and public cloud services. Air Gapping, alongside stringent firewall technology and specialist data encryption software, protects against hacking, data leaks and unauthorised monitoring. But it means that the majority of SaaS solutions are not an option, and on-prem software is a requirement.

Minimised third-party access to data

Very few sectors of the economy require Air-Gapped networks. However, national and local government departments and the banking, healthcare, legal and accounting sectors still have stringent security requirements. They may be more comfortable working with suppliers that do not store or process sensitive data on third-party software solutions outside of their network. On-prem software would be one way to satisfy this requirement.

There is a trade-off here, of course. If you use on-prem software, your business is usually solely responsible data security—and the data is only as secure as your processes and IT infrastructure. On the other hand, SaaS solutions by their nature require data to flow between third-party data centres and client IT infrastructure. This does not necessarily make SaaS less secure. Some SaaS solutions use private cloud connections and data encryption to offer an extra level of protection, while others have in-built anti-virus and cyberthreat protection too.

Application response and latency

Some SaaS applications can suffer from performance issues if they have to operate over a slow Internet connection. One of Asolvi’s Welsh customers, for example, uses a 5 Mbps service, but most of the time it runs at 1.5 Mbps. This is far lower than the minimum connection speed required by our SaaS software. So it makes sense for them to use our on-prem offering rather than migrating to our SaaS solution.

SaaS solutions and on-prem software both experience some latency issues when connecting remote workers or field operatives. Again, this isn’t a fault of the software but a result of varying connection speeds. However, it’s worth noting that SaaS solutions tend to have a slight edge in providing faster and more straight-forward remote access when compared using terminal services or remote desktop solutions to connect back to on-prem software. So it’s a case of weighing up the pros and cons and deciding which is more effective for your situation.

Full control over the location of your data

When you’re using on-prem software—without any cloud-based backup—you know exactly where your data is at any given time. By contrast, if you deploy a cloud-based SaaS solution, you may not know where your information is being physically stored. Some SaaS providers will offer the option to pick a data centre in your region, or even in the same country. Asolvi, for example, is committed to hosting client data in the same legal jurisdiction. But other companies do not offer that level of specification, which can cause problems. For example, if you're based in the UK or mainland Europe, and your SaaS provider is using American data centres, then conflicts can between GDPR and US data disclosure requests.

On-prem does not always mean no-cloud

Throughout this article, we’ve talked about on-prem and SaaS solutions in isolation. But the reality is not so clear cut. Some on-prem software includes cloud-based elements, and some SaaS solutions have on-prem components. The most common ones are backup and recovery architecture, server virtualisation applications and remote storage. And that’s before we even start to talk about Infrastructure as a Service (IaaS), Platform as a Service (PaaS) and hybrid cloud offerings—but these are all topics for a different time!


The debate about SaaS vs on-prem solutions continues—and will do so for some time. The general agreement is that while on-prem remains essential in many instances, most businesses will see some form of migration towards SaaS over the coming years. They will undoubtedly co-exist in most organisations for some time—if not always—so it’s essential to be adaptable and balance on-prem and SaaS to meet your corporate objectives and IT budget. Think first about the problem you're trying to solve before you start to think in terms of either a SaaS installation or an on-prem solution. Once you’ve answered that question, you’ll be in a much stronger position to choose the most effective option.

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