Looking to stop overspending on legacy software infrastructure?
Whether you know it or not, your business has come to a crossroads. The path you choose with regard to your software infrastructure will determine whether your software empowers you to grow or holds you back.
Enter Cloud vs. On Premise…
The debate around these two technologies has been swirling for years. We’ve collected real data and cost figures to lay this argument to rest once and for all.
Here’s what you’ll learn:
- What Is Cloud Hosting?
- How Much Cloud Hosting REALLY Costs
- What Spending Money On-Premise Means for Your Budget
- How To Choose the Option That Makes Financial Sense For You
What Is Cloud Hosting?
Hosting your business software solution in the cloud means your infrastructure runs on a third-party server rather than on hardware located in-house.
Picture renting versus owning a home.
With cloud hosting you pay monthly fees and someone else worries about maintenance, updates, security and any other necessities. No server rooms. No in-house IT woes. No surprise repair costs.
Hosting your software on-premise means you own all of the servers and software outright. Don’t let the “ownership” part fool you though. With ownership comes consequences…
Businesses have been migrating to the cloud at alarming rates. In fact, cloud solutions represented 78.6% of new ERP system implementations in 2024 according to research from Panorama Consulting Group. That’s up from 64.5% just one year prior!
When it comes to the decision-making process, getting familiar with the full sap business one cost is essential before settling on a cloud hosting option.
Point is, the market has spoken and businesses are voting with their wallets.
How Much Cloud Hosting REALLY Costs
If we’re being honest, costs are pretty self-explanatory here. Let’s take a look at what you’re actually spending money on with each option.
On-premise expenses:
- Hardware purchases/upgrades
- Server room space and maintenance
- Salaries/training for IT personnel
- Software licence fees/upgrades
- Electricity/cooling costs
- Back up and recovery hardware/software
Cloud expenses:
- Hosting subscription (monthly or annually)
Simple as that.
When you buy into an on-premise solution you incur huge costs before the software can even do anything meaningful for you. Then your expensive infrastructure continues to bleed your budget every month.
Cloud flips this model on its head. You enjoy significantly lower upfront costs and pay affordable rates monthly. All your invoices are flat fees with no unexpected glitches when hardware decides to die on you.
Nucleus Research recently found that businesses who switched from on-premise accounting software to cloud-based saved 34% on costs after three years.
Why Spending Money On-Premise Will Drain Your Budget
Hosting your business software on-premise can seem like a really attractive option.
It gives you ownership and control. Someone can’t take your software away from you.
Here’s the thing…
Ownership and control come at a price. A price that will continue to grow the longer you keep your on-premise system.
Servers require maintenance. They break. They become outdated. You’ll need specialised teams to keep everything updated and running smoothly.
These teams aren’t cheap.
Every time your software needs updating your IT team will have to manually process it. Whether it be security updates or new features being rolled out. It’s all work your team will have to handle on top of their day-to-day tasks.
Work that could be going into growing your business.
Then let’s talk about growing your software needs too. Perhaps you hire more employees and need more users on the software. With on-premise setups you’ll need to invest in more hardware. IT time to set this up. More user licenses. You get the idea.
On-premise software solutions often have horrible hidden costs. Here are some examples:
- Server room electric bills
- A/C to keep all your hardware from overheating
- Repair costs when things inevitably break
- Security and compliance monitoring
- Backing up your data and storing it
When planning their on-premise budgets businesses often under project these costs by upwards of 40%.
Cloud Advantages For Businesses Scaling
Cloud solutions were designed to scale.
Need five more users next week? No problem. What about if your business is opening up a second location? The second office have access to everything ASAP.
This type of scalability is crucial for growing businesses. On-premise systems take time to configure. Often requiring new hardware to be installed. Growth comes quicker than most IT departments can keep up these days.
Cloud is instant. Only pay for what you need. Scale back if you need to.
Security is another argument people used to throw out against cloud-based software. Those days are long gone.
Cloud providers spend millions — if not billions — on security infrastructure. They have full time security teams. Compliance certifications you’d struggle to obtain yourself.
Your hardware closet is not holding a candle to the security of cloud providers.
Oh and one last thing…
Cloud providers handle all the updates for you. New features are rolled out automatically. Security patches applied. Your software is always up-to-date without your team having to do anything.
Simply awesome.
On-premise updates can take DAYS. They need to be planned, tested and implemented by your IT staff. Which is why most businesses fall behind on updates. Too expensive. Too much work.
But failing to update your software doesn’t just expose you to security risks. You’re also missing out on efficiency upgrades that could save your business money.
When On-Premise Makes Sense
It isn’t fair to slam on-premise solutions completely. There are scenarios where buying your own software can make sense.
Businesses with specific compliance needs that mandate on-premise data storage for example. Or businesses that already sunk tons of money into infrastructure that hasn’t been fully depreciated.
If your business:
- Has severe regulatory needs that can’t be met by cloud providers
- Has locations with poor internet connectivity
- Already owns hardware that would be wasted by moving to the cloud
- Has IT teams that are already overloaded
…it might make sense to go on-premise.
But this is a small minority. Cloud providers are constantly updating their compliance standards. Internet connectivity is only getting faster everywhere.
How To Decide What Makes Sense For YOUR Business
This isn’t about picking team cloud or team on-premise. This is about your bottom line.
Companies of all sizes can see the cost benefits of cloud hosting. Lower upfront costs allow SMBs to deploy enterprise class software without killing their budget.
That’s money you can spend hiring more staff. Marketing your business. Developing your product.
Things to consider when making your decision:
- Current in-house IT capabilities/budget
- Growth projections for your business
- Does remote work play a factor for you?
- Do you have specific compliance needs?
- Where do you see your technology standing in 5 years?
If you’re reading this you probably know that cloud hosting will provide your business with better financial returns in the long run.
Wrapping up Cloud vs On-Premise Hosting
It’s time we ended the cloud versus on-premise software debate once and for all.
Cloud hosting wins almost every category. Lower upfront costs, low monthly fees and avoids ridiculous hidden costs that eating away at your budget with on-premise software.
Let’s recap:
- Cloud solutions are cheaper over their total lifetime.
- On-premise software has a ton of hidden expenses.
- Cloud wins when it comes to scalability/flexibility.
- Security these days is in the cloud’s favour.
- Businesses that scale will benefit most from cloud software.
Businesses have already decided what makes more financial sense by the amount of new implementations that are cloud-based. Nearly 80%!
There is no debate here. Not anymore.
The only question you should be asking yourself is how long can your business afford to ignore the cloud?
