SaaS or Onsite Software? A Comprehensive Guide

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Business tools have changed a lot in the last ten years. Given the ubiquity of the internet, and with increasingly low barriers to entry for software development, an army of startups have been pushing subscription-based, Software-as-a-Service (SaaS) applications out to the public at a steady rate.

One of the dilemmas entrepreneurs face is deciding which school of thought to follow with their software: SaaS, or the more traditional onsite model. I’ve had a lot of experience with both, so today I’ll be covering their respective strengths and weaknesses.

SaaS

What are Software-as-a-Service (SaaS) solutions? For those unfamiliar with the term, “SaaS” refers to web applications, centrally hosted by a provider, that you pay a subscription fee to use. Think of a SaaS as a weekly milk delivery service, except instead of dairy products, you’re getting access to business software, and instead of a milk man, the internet delivers your goods.

The SaaS model has become popular because web applications are generally easy to learn, easy to set up, don’t require any hardware, and can be used from anywhere in the world. The emphasis placed on design and user experience (UX) are other reasons for the appeal.

Shipstation is a good example of software you see in this category.

Onsite Software

In contrast to the web-only world of the SaaS, there’s the old guard of onsite software. Onsite applications are installed on a single computer, on which data is then stored. These solutions are typically designed for Windows systems.

Onsite software (or “desktop software” as I’ll occasionally refer to it) offers benefits in speed, scalability, and security at a level that web applications can’t provide. They’re sometimes available for outright purchase, though depending on the industry, they may follow a monthly licensing model. Sticking with the dairy analogy, onsite software is like buying or renting a cow that you milk on your property. Except, instead of squeezing an udder–you know what? You get it.

ShipWorks is a great example of Onsite software.

Case Study

Since my milk metaphor was a bit esoteric (i.e. “dumb”), I’m going to use one of the categories I cover, shipping, as a case study. Keep in mind that these concepts will apply to any kind of software service, whether it is a point-of-sale solution, an accounting suite, or a CRM tool. The right choice for you is going to depend on how big your company is, and what kind of resources are at your disposal.

Location, Location, Location

A big factor in determining which paradigm to use is the physical space you’re working in. To put it plainly, where will you do the work? To use our shipping scenario, do you have one employee who handles this task for your company? Do they work in an office, or are they on the go? Will other employees need real-time access to the information?

If shipping tasks are managed in one spot, then onsite software is going to be your best bet; there won’t be much value in being able to access your records from multiple machines in different locations. However, if you’re a small company that doesn’t have an office, the flexibility offered by a SaaS starts to look more attractive. If your team members work remotely, they’ll have access to the same information, regardless of where they are in the world.

It’s 10PM, Do You Know Where Your Data Is?

Business applications typically store all your client data, sales figures, billing accounts, and a host of other sensitive information you don’t want out in the wild. When you use a SaaS, you are essentially trusting these assets to another company’s IT department.

For a small company this may be the right move. If you don’t have someone on your team specializes in network security, it may be better to leave it to the experts.

If you do have IT staff, however, I would recommend going the onsite route. As a general principal, having your information on one machine, behind an enterprise-level firewall, is a lot more secure than storing it on a server farm alongside 100,000 other users. Data breaches happen to large companies all the time.

Setting Up the Account

One of the most attractive features of SaaS is the convenience. With a lot of these applications, you can be set up within an hour, and have all the tools mastered within a few days. There are typically no startup fees, and no special hardware required, which is great.

For onsite software, it usually takes longer to get the platform off the ground, and there may be hardware costs to consider. Using our shipping case study, you would likely want to set aside a dedicated PC to run a solution like ShipWorks, or buy one if your company didn’t have a machine that could be repurposed. Then, of course, you’d need to dedicate extra time to configuring the box and installing the software. You would also do well to factor in time spent maintaining that machine and backing it up, so you don’t lose your data in a hard drive crash.

Again, the cost/benefit is going to depend on what your organization looks like. The smaller you get, and the fewer resources you have at your disposal, the more attractive SaaS becomes.

How High the Bar

The last thing to look at is speed and scalability. Generally, onsite software has a higher ceiling on what it can do efficiently. That’s just how it is.

Web applications have to distribute resources between many customers. In some cases your account could be on a server along with thousands of others, all dependent on the same hardware to process their tasks. To revisit our shipping case study one last time: some companies may start to experience a noticeable drop in performance when their order volume gets into the thousands or tens of thousands. Searching through your order history can become cumbersome, processing bulk orders can start to take longer than it used to, and so on.

Desktop software is going to handle high order volume better, because you have more machine resources available to process your data than what you’ll find in the server farms that SaaS solutions employ. If your company needs to deal with high order volume, then this is a really important point to consider.

Conclusion

As I mentioned earlier, these concepts apply to all business tools, not just shipping solutions. The general trend is that for larger companies, it’s probably wiser to host your software onsite, whereas smaller operations will see the most benefit from a SaaS. I wouldn’t say this is a rigid model though. Every organization is different, so bear in mind what your needs are, now and in the future, when investing your company’s resources.

That about covers it. Be sure to check out my reviews on Inventory Management and Shipping Software, and I’ll see you soon!

Jon Titterington

Jon Titterington

Writer at Merchant Maverick
Jon Titterington is a writer from Los Angeles, California. He first started working in tech in 2006.
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