The decision between SaaS vs. on-prem depends on various factors, and each option has its benefits and drawbacks.

In this article, we'll dive into the SaaS vs. on-prem debate to help you understand the pros & cons of each option and make an informed decision that is best for your business.

SaaS vs. On-Prem: What are They?

Before discussing on-premise vs. SaaS differences, let's first what these actually are;

Software as a Service (SaaS)

It's a cloud-based delivery model for software applications and services. This model is widely used by businesses to implement enterprise applications, such as customer relationship management (CRM), human resources (HR), content management systems (CMS), computer-aided design (CAD), and more.

According to Fortune Business Insights, the global SaaS market is expected to increase by 27.5% between 2021 and 2028, reaching a value of $716.52 billion.

SaaS operations can be accessed from anywhere via the Internet, usually through a subscription, and use cloud storage for data storage. In addition, they are often customizable through features like add-ons or APIs that allow users to extend their functionality to suit their needs better.

While SaaS offers many advantages, such as cost-effectiveness, scalability, and accessibility, it's essential to follow some best practices and tips to maximize its benefits. SaaS is a model that offers many advantages to both service providers and customers, including;

  • Lower up-front capital costs for the customer.
  • Lower maintenance costs for the customer.
  • Fewer hardware requirements for the customer.


On-premise hosting refers to hosting a website or software on a physical server instead of in the cloud. On-premise hosting is preferred by companies that want complete control over their data, including how it's backed up and protected.

It can also be more cost effective than cloud hosting because there's no need to pay for bandwidth or other services.

However, on-premise hosting requires technical expertise to set up and maintain the servers. In addition, sensitive data is stored in-house instead of in a secure data center, increasing security risks.

Might be interesting: Explaining SaaS Agreement & How to Manage an Ideal SaaS Contract

Benefits of SaaS vs. On-Premise

SaaS is ranked as the third most crucial IT investment for businesses. Twenty-five percent was allocated to labor and services, while the remaining 20% went to local software installations.

The trend, however, reveals that businesses are increasingly turning to SaaS to accommodate remote workers, while spending on on-premises software is predicted to fall.

Pros and cons of saas vs. on-premise while considering multiple factors;


SaaS is typically cheaper than on-premise software because a third party provides the infrastructure and security to run the service. As a result, it reduces your IT costs, which is especially beneficial for small businesses with limited budgets.

On the other hand, you may need to pay for an internet connection, and some SaaS services require additional hardware (such as servers) to run correctly.


In SaaS vs. on-prem comparison, scalability is a crucial factor. In terms of scalability, SaaS is a clear winner. While it's possible to scale on-premise software by adding more server capacity, SaaS providers can scale up and down instantly. It means that your business can respond quickly to changes in the market without having to wait for extra hardware or software to be bought and installed.

On the other hand, if you want to change the software itself (for example, by upgrading it), this can be more difficult with SaaS. First, you'll need to talk to your service provider about your requirements and ask them if they're planning any upgrades that might meet your needs. If not, you'll have to wait until they make such an upgrade available.


While SaaS allows you to customize your software as needed, some services offer little or no customization. For example, if you need an extra feature added to your CRM platform, you'll have to talk with the service provider about adding it — if the provider even offers this feature.

On-premise software gives you more control over how you use the service and what features are available since they are installed on your servers rather than managed by someone else's servers.


In on-prem vs. SaaS comparison, many consider upgrades a deciding factor. With on-premise software, IT professionals or programmers who work for your company often do upgrades manually. Unfortunately, it means that new features may take months or even years before they're available for everyone in your company.

With SaaS, however, upgrades are automatic and happen whenever the vendor releases them without any additional cost or effort from your end. There are also no compatibility issues with new versions of operating systems or other third-party applications because it's all hosted in the cloud and doesn't require any downloads or installation on your computer.

Regulatory Compliance

SaaS is an excellent solution for any organization looking for a secure and compliant way to store sensitive data. SaaS applications are hosted in an environment that can be regularly monitored for security and compliance. It eliminates the need for IT teams to monitor and manage their systems, which can be complex and time-consuming.

On-premise software is the traditional way of storing data. It requires software to be installed on your servers, which means that you have more control over your data but also leaves you responsible for any breaches or other issues that may occur in your systems.

Worth checking: Calculating and Interpreting SaaS LTV Metric with an Expert

Why SaaS is better than On-Premise

SaaS is the most common form of cloud computing and has many distinct advantages over other cloud services.

Flexibility and Accessibility

With SaaS, you can access your software on any Internet-connected device anytime. It means you don't have to worry about installing new software or training users on how to use it. Instead, you log in and start using your software as if you were using a desktop application. This makes them accessible and easy to use, even for people who aren't particularly tech-savvy.

Cost Efficiency

SaaS offers significant cost savings compared with traditional installations. There are no hardware costs or maintenance fees associated with SaaS, which makes it much more affordable than installing standard software on your servers. The only actual expense with SaaS is paying for the service each month (usually less than what it would cost to buy the equivalent software outright).

Automatic Updates and Maintenance

SaaS applications automatically receive platform updates and maintenance. As a result, you don't need to worry about maintenance costs or system downtime.

Security and Data Protection

Security is another significant benefit of SaaS. Since your data is stored in the cloud, it is more secure than if stored on your servers.

Additionally, if your business uses multiple applications across multiple teams, security becomes even more critical because each application may need its unique set of security protocols. SaaS allows you to apply one set of security protocols across your business's applications.

Focus on Core Business

With server management taken care of by third parties, companies can focus more on their core business than managing technology infrastructure.

On-Premise Features

The on-premise model has the most features and functionality, but it requires you to invest in hardware, software, and IT support.

On-Premise Features

In an on-premise solution, all data is stored on your premises. This means no reliance on third-party vendors and no risk of violating your proprietary information by a third party. It also provides absolute security and controls over your data, a significant concern for many businesses.

Fixed Cost

On-premise solutions are typically more expensive than cloud solutions because you have to pay for the equipment, software licenses, and maintenance fees for the systems that host your data. However, this expense is often offset by lower costs associated with cloud storage services. In addition, once you purchase your hardware and software, there are generally no additional monthly fees like with cloud services.

Absolute Security and Control

The main advantage of an on-premise solution is that it offers absolute security for your sensitive information because it's not stored on someone else's servers or in their facilities. Suppose your company has compliance issues or regulatory requirements requiring strict adherence to security policies and procedures. In that case, an on-premise solution may be your best option.

Also read: Benefits and List of Best Examples of SaaS for Healthcare

Who Should Choose On-Premise, And Who Should Choose SaaS?

Both systems are robust, but some companies prefer one because it better fits their needs. On-premise services offer greater flexibility than cloud-based ones. The idea behind software as a service (SaaS) is that businesses should adopt another's ideals of how work should be conducted and what features should be available.

You can only employ the functions of your SaaS solution (there may be many, but there needs to be a way to determine that in advance), which can restrict your business' growth.

Where requirements call for specific functionality or security measures that may not fit with a generic SaaS platform is in government organizations or banks, where on-premise is often preferred.

SaaS solutions can be helpful for other businesses, especially new ones, because they are simple to implement quickly.

Balancing Requirements and Resources: Deciding Between SaaS vs. On-Prem

Ultimately, the decision between on-premise and cloud-based software should be made based on the needs and usage of your business. Suppose you have a small team that doesn't require the added security of on-premise software and is concerned about investing in software quickly becoming outdated and irrelevant. In that case, a SaaS solution may be just what you need to get started.

As for those companies with more complex needs, as well as high storage restrictions or regulatory compliance issues, investing in on-premise software might offer you a better return on your investment.

And if you need help making the right choice for your business, consider working with us - we offer comprehensive support throughout product development, from idea discovery to product growth. With our invested team, you can confidently conquer the target market.