Cloud or On-premise Software Solution? A Quick Guide to Make the Right Decision

Firms are riddled with alternatives when it comes to new and emerging software technology to better support their business decisions. More recently, the question facing firms is; which is better – cloud computing or the traditional client server-based software solution? There is no one-size-fits-all answer for the question above; each organization has its own complexities and business requirements. However, there a few key features for each solution that we can analyze to a greater degree.

The purpose of this article is to provide firms with a sound comparison to support the decision between cloud computing and traditional client server solutions.

Cloud Solutions

  • Cost-effective Solution: Since there are economies of scale with cloud computing, this is often considered a more economically sound solution for many firms. Also, there is little to no monetary requirement to set up infrastructure specifically to implement the cloud solution as is the case with a truly cloud-based solution (for example, Google Gmail). However, not all cloud solutions are created equal, and some cloud-based solutions require installation of supporting software on premise, which can add to costs and labor and take away from the benefits of the cloud.
  • Time Savings: One of the major benefits of a cloud solution is the time savings resulting from not having to take on implementation and ongoing software updates in-house. All of these can be handled through the software vendor. Although there are benefits to this from an IT perspective, software updates provided through the vendor may be deployed at any time and can be unplanned or not aligned with the firm’s internal processes and scheduling. And since users share instances of the cloud with other companies, a maintenance window may be required where your solution is offline for a period of time.
  • Increased Accessibility: Cloud computing offers an efficient solution for large distributed user bases with numerous satellite offices. Since the server is running remotely, firms are able to more or less “rent” the software for all of its offices in a single instance. The solution depends on the support and strength of the hosting company’s setup. Also the information stored onto the server is easily accessible from any remote location, allowing for stakeholders to access information when they need it, typically from any mobile device such as a laptop.

Disadvantages to Cloud Solutions

  • Limited in Functionality: With cloud computing software, a one-size-fits-all mentality is used in development, therefore potentially limiting the ability to customize solutions to fit unique requirements or functionality that are specific to the customer. There can be compatibility issues with various other software solutions that are being used by a customer, making the integration of internal systems and cloud systems much more daunting.
  • Technical Issues: Although possible with any type of software solution, the technical issues that may arise are not limited to the infrastructure; these can come in the form of software updates or patches from the software vendor that are applied to all users sharing the cloud solution. For example, a software update that may only be required for a subset of the other customers on the cloud solution is applied to all customers regardless of relevance. An update that may not be required for your solution may cause unforeseen technical issues. Your firm may then be forced to become reliant on the software vendor or cloud provider to resolve the issue or it may result in a temporary system-wide outage or downtime to repair the issue. Depending on the number of clients affected, the wait times for resolution can be excessive, or worse, come at a critical point in your business process. With cloud solutions being a fairly new option, the frequency and number of issues that can potentially occur is typically unknown to both the customer and host solution provider.
  • Real-time Data/Intermediate Functionality: With cloud solutions, much of the data stored internally within a firm is required to be pushed into the cloud, and in many cases there is a large amount of data being uploaded at any given time. The process itself can take several minutes depending on the complexity of the function being required. This translates to losing the real-time data drill-down capability given essential data may not have made its way to the cloud at the time of reporting.
  • Security: This is the greatest risk to anyone considering a cloud-based solution, especially for financial reporting and budgeting purposes. Storing all corporate financial data on the cloud is a major risk since the data is vulnerable to attack and the data is often very sensitive in nature. Recently, major cloud solutions with some of the most sound infrastructure and security protocols have succumbed to some form of security breach or attack, compromising the data and private information of its users.

On-premise Solution

  • Secure Software Solution: An on-premise solution allows firms the freedom to set and manage security controls on sensitive financial information direct within their own network and lets them constantly monitor for suspicious activity. Having complete control of your system, protected behind your fire wall, ultimately makes your solution and data very secure, given regular maintenance procedures are in place.
  • Real-time Information: Since data is stored on internal servers, users are able to drill down on data in real time and also receive critical information instantly and much more quickly than compared to a cloud solution. Furthermore, since the solution is running on internal infrastructure, it easily integrates with other solutions and processes to provide complete transparency across the firm and reduce or eliminate software silos.
  • Little Incremental Cost: With on-premise solutions, the software is often catered toward the client where much of the configuration is completed through the implementation phase. Although there may some associated costs through upgrades or further customization, there are fewer layers of recurring costs and greater control to only apply fixes that are relevant to your solution. Server virtualization can further minimize infrastructure costs while your firm continues to reap the benefits of an on-premise solution.
  • Easy Integration: This is likely one of the most important factors for a customer given the goal of software purchases should be to reduce, if not eliminate, software silos and lower the total cost of ownership by increasing efficiency and productivity. With on-premise solutions, integration among various software solutions is much simpler since all the systems are on the customer’s internal network and can be integrated to communicate with each other seamlessly. Typically, the implementation is only considered complete once all solutions are working together harmoniously. Cloud solutions are usually independent, point solutions that provide little integration support or can be difficult to integrate with a cloud-based solution.

Disadvantages of On-premise Solutions

  • Higher Setup Costs: On-premise solutions often have higher associated start-up costs given the high-level of consultation that may be required. This solution may be considered costly for smaller firms looking to get started quickly. However, over time, the high fees tend to pay for themselves since there are few recurring costs after successful implementation.
  • Limited Access Using Mobile/Tablet: Many (but not all) on-premise solutions lack mobile and tablet applications to support similar functionality to their desktop / pc solution. There are some software vendors who are trending toward offering hybrid solutions, where the user has access to high-level data on mobile devices. Although, such functionality is not readily found in most solutions, more and more on-premise solutions are rapidly closing the gap and are anticipated to provide equal functionality in the future.
  • Onsite Administrative Training Required: A majority of on-premise solutions require the IT team to be somewhat adept in the software solution for maintenance and daily troubleshooting. Firms may be required to have individuals go through thorough training and documentation in order to be able to take care of day-to-day system maintenance. Given the size of the firm, this may be a cost already accounted for. However, for smaller firms, there may not be resources available to fill these roles internally.

Because of the great leaps technology has made over recent years, legal and professional services firms find themselves in an exciting era, with numerous options at their fingertips. To determine the appropriate solution for your firm, it is extremely important to consider which features and functionalities are imperative. Importance of security is one of the fundamental determinants many legal and professional services firms may choose to base their decision. For this reason, it is advisable to choose an on-premise solution in present-day; however in the future, cloud computing is most likely the direction all software solutions will trend, given enough time will have elapsed to mitigate security risks.

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