SaaS Solutions vs Hosted/On-Premise Solutions - what exactly is the difference?

June 1, 2022

Times are constantly changing, but technology never takes a break to stop evolving.

The advances of the present could even be considered a miracle back then. Except, they are not. 

They are a prominent part of our lives—especially in business.

That is why you should be apt to follow the trends and learn how you can benefit from these changes.

Today, the subject of change is the types of deployment in software. In other words, it is all about the implementation type that you can use when it comes to software applications. Worry not; I will take things slow and explain everything one by one.

Here begins SaaS vs On-Premise/Hosted solutions.

What is SaaS?

SaaS (software as a service) is a cloud-based software delivery model that lets you reach data wherever you are as long as you have a device that connects to the internet. 

To elaborate, SaaS is a software solution that works on a subscription basis for customers to use applications over the internet.

For example, the very-much-loved Netflix is a SaaS company whose business model offers access to stream movies, series, and shows on its own platform in exchange for a subscription fee on a monthly basis.

Characteristics of SaaS Businesses

Here are the major characteristics of SaaS businesses for you to grasp the concept even better:

➡️SaaS businesses host their application software and databases to users by a 3rd party provider.

➡️They provide access to software via the internet to their users, who are called tenants—also, it accommodates a multi-tenancy model.

➡️They are purchased on a user subscription basis.

➡️Updates are applied automatically without user intervention.

➡️No additional hardware is mandated to be installed by the user.

These features might remind you of the applications that you are already familiar with, such as the ones you connect to and use throughout your shift. For instance, Microsoft Office 365 is a SaaS office tool that many derive value from using its services during work hours.

What Are Hosted/On-Premise Solutions?

Hosted and on-premise solutions are two other key systems that are similar to SaaS in terms of the services that they are offering. Most importantly, hosted and on-premise solutions slightly differ from each other in where they are installed.

An on-premise solution is installed on a server on the premises that belong to the client, whereas a hosted solution is installed on an off-site server that is located in a data centre.

Another dissimilarity they have is that an on-premise software relies fully on the client to run the software, while a hosted software is more independent when it comes to operating.

To be more exact, on-premise implementation requires the funds and engagement of the client in all cases. For example, the client must purchase power, operating system, database, software, infrastructure, etc., should they choose to employ an on-premise model. What is more, the client has to maintain software upgrades, maintenance, and support all by themselves.

On the other hand, a hosted implementation requires you to purchase only licenses to use the software but does not require the hardware and infrastructure to be bought since you can rent those from a software vendor or another third-party provider. Regardless, you own the software that you purchase in the first place.

A great example of an on-premise solution is the Microsoft Office packages (for example, Office 2021) as a standalone alternative—of course, before they turned into Microsoft Office 365, which is classified as a SaaS product. Amazon Web Services should be mentioned to exemplify a hosted solution since they also take a cloud-based approach.

Characteristics of Hosted/On-Premise Businesses

Here are the major characteristics of hosted and on-premise businesses for you to easily differentiate between the cloud-based solution and understand these deployment models in depth:

➡️On-premise businesses require extensive hardware, which also calls for an IT team to care for both the hardware and software.

➡️On-premise software is typically purchased through a perpetual license, which demands a high upfront cost as it is a one-time charge that allows the client to utilise the software program permanently.

➡️On-premise solution demands the client to deal with data security. Employing one means that you have to meet the security requirements and support the on-premise system regularly.

➡️On-premise implementation requires the client to make sure that the on-premise system is supported on a regular basis since everything starting from the software update to hardware requirements will fall upon the area of the client's duty.

➡️As it is only purchased once, you will not have to pay as if you are renting a service; however, there will be annual maintenance costs that you must be willing to pay.

What Are the Differences Between SaaS and Hosted and On-Premise Solutions?

Having discussed the meaning and characteristics of both terms, it is high time that we compared and contrasted them to see which one is a more suitable fit for you and your business.

Here are the key differences between SaaS and hosted and on-premise solutions:

#1 Deployment

On-premise: All of the resources are deployed in-house when you choose to employ an on-premise solution. As mentioned above, on-premise businesses offer you the software; however, you are responsible for sustaining the program and any related practices that come with it. In addition, all the data is placed within the company's IT infrastructure. 

SaaS: Thanks to cloud computing, all of the resources are deployed on the service provider's premise when you prefer using a SaaS solution.

So, the client does not have to own an infrastructure to support the software within its premises. Instead, the access to the resources will be granted for usage whenever and wherever without the client playing the host.

#2 Implementation and access

On-premise: The implementation process of an on-premise solution takes a longer time compared to a SaaS solution since the software is placed within the premise of the company, which prompts the client to own decent hardware to host the software in-house without any delays or problems.

In addition, having the software located within a designated area that falls into the company's quarters means that it cannot be accessed from any other place. This limits the solution's usability since one cannot connect to it without being on the company grounds.

SaaS: On the other hand, SaaS does not take long to either reach or execute since it is not deployed within the company's premises. Instead, it can be accessed through the internet.

One advantage of this feature is that you are not required to be at a fixed place to run the application; you might as well be at home, yet you will access it as long as you have a device that connects you to the internet where the solution is readily obtainable.

#3 Maintenance 

On-premise: Since on-premise solutions are situated within the company's premises, it is only natural that you are the one to maintain them in all cases. This means that you are on your own for the actions that are needed to be taken regarding the software, such as support, maintenance, and upgrades.

A dangerous side of this liability is the possibility of a disaster occurring within the system, which would immediately need to be fixed by your IT team in order to keep the software safe and secure.

That is why should you choose to utilise an on-premise solution; you must ensure that your IT team is qualified enough to provide the software requirements.

SaaS: This is not much of a case when it comes to SaaS products because they are hosted by a third-party provider, which directly excludes the client from any process that is related to the sustainability of the software, such as support, maintenance, and upgrades. In case of trouble, it will be the provider's job to fix the application or recover the data lost.

#4 Cost

On-premise: On-premise solutions are purchased once and used forever. This might seem like a convenient method to follow; there are a lot more you, as a client, need to consider in terms of costs.

After purchasing the software, you will need to acquire the proper hardware that the software requires.

There will be costs regarding not only the purchase of the hardware but also the setup, implementation, and (mostly annual) upgrades of it—which will fall into the responsibility of your IT team that deals with the IT infrastructure to detect any problem and prevent any problem from arising.

SaaS: Unlike on-premise solutions, SaaS does not permit you to purchase the product in one go. Instead, you are expected to pay on a monthly or annual basis in order to use it, which derives from the subscription-based model of the SaaS businesses.

Also, it is important to note that the entry cost of SaaS products is rather low compared to the on-premise solutions.


On-premise solutions are the predecessor of the SaaS products of today, without a doubt.

So, it is quite possible to say that SaaS products are the enhanced versions of the on-premise solutions if not improved and upgraded in terms of features and opportunities.

With that being said, this article is solely prepared for you to make the ultimate decision with your company's needs and expectations in mind.







Renk Mert