In this article, we aim to examine both concepts, compare their advantages and disadvantages, and determine which option is best suited to different types of companies.

SaaS vs. On-Premises - Definition of Terms

Before we look at when each option is recommended for IT, let's briefly summarize what exactly the two terms describe:

Software-as-a-Service (SaaS)
This is a delivery model in which software is made available over the internet (via cloud services). Users access the application via the web or an app. The software is available “for rent” and is hosted and maintained centrally by the provider. More detailed information on this can be found in our encyclopedia article on Software-as-a-Service.
On-Premises
On-premises (also: on-prem) refers to software that is installed and operated on a company's own IT infrastructure. This software was purchased once and can be used without restriction from this point onwards. The responsibility for operation, maintenance and security lies entirely with the company itself.

This is a shortened summary of the two terms. However, it is sufficient for the following considerations.

SaaS or On-Premises - Important Decision Criteria for Companies

When deciding for or against specific software solutions, companies should consider a few important decision criteria in advance. The following criteria are particularly relevant:

Implementation
Infrastructure
Costs
Scalability / growth
Maintenance / Support
(Cyber-)security

Based on these criteria, we have created an overview of the extent to which SaaS and on-premises fulfill the respective points and whether and to what extent they are relevant at this point.

Illustration of hidden factors of SaaS and on-premise using an iceberg.

Switching from on-premises to SaaS can be a considerable relief for your own IT department. © GFOS Group

Implementation

SaaS
SaaS solutions enable rapid implementation in your own processes, as no time-consuming on-site installation is required. Companies need little more than Internet access to set it up. This not only reduces the workload for the IT department, but also significantly minimizes the implementation time and allows rapid use by one or more departments in the company.

On-Premises
The implementation of on-premises software is generally more complex (than comparable SaaS solutions). It requires the provision and configuration of local servers and a corresponding integration or connection to the other systems. If further individual adjustments are also necessary, this requires additional time and resources.

Infrastructure

SaaS
With SaaS solution (Microsoft Office Suite / GFOS knownCloud etc.), the required IT infrastructure is provided and managed by the provider. Companies do not have to worry about servers, storage capacity or updates. The process can often be simplified even further via cloud migration. This reduces the administrative workload and allows companies to concentrate purely on their core business.

On-Premises
To use on-premises solutions, companies are dependent on an appropriate IT infrastructure on site. To do this, they must have their own servers, ideally with suitable backup mechanisms and security measures. Such a solution offers more control but is both costly and maintenance-intensive and requires a well-equipped internal IT department.

Costs

SaaS
Most SaaS models are characterized by a usage-based billing model (subscription model). These subscription fees allow for good predictability and lower entry costs, which is of particular interest to SMEs (with a small budget).

On-Premises
An on-premises solution requires high initial investments in hardware, licenses and personnel. There are also ongoing costs for maintenance and servicing. However, this solution can pay off in the long term under certain circumstances, especially if it is expected to be used for a long time without major change requirements.

Scalability / Growth

SaaS
SaaS solutions offer companies the advantage that they can be adapted to their own needs with virtually no delay and complete flexibility. Adding users, storage space or functions usually takes no more than a few clicks. Thanks to the almost unlimited scalability of such a cloud infrastructure, companies can react quickly to new requirements or developments on the market.

On-Premises
With on-premises solutions, scaling often involves considerable investment and time. Additional servers, network capacities or software licenses must be procured, installed and configured. New capacities therefore must be created at great expense and cannot be quickly reduced in the event of changes in the market - in the worst-case scenario, overcapacity is added to a slump in orders.

Maintenance / Support

SaaS
The maintenance of SaaS solutions is entirely the responsibility of the provider. This includes regular updates, bug fixes and security patches. Companies can count on the reliable functioning of the booked software and focus on their own core business. This also significantly reduces the workload on their own IT department.

On-Premises
With on-premises systems, the company itself is responsible for maintenance and servicing. From system updates and backups to security measures and troubleshooting - everything lies with the company. This means maximum control, but also maximum responsibility. This requires qualified personnel who must be able to quickly identify and resolve even business-critical problems.

(Cyber-) Security

SaaS
SaaS providers rely on modern, often certified security solutions for their services. Depending on (industry-specific) data protection requirements, many providers also offer customer-specific service level agreements (SLAs). Despite all this, there is still a certain “residual risk”, as the data is not under direct, in-house control and cyber security is guaranteed by third parties.

On-Premises
If companies opt for an on-premises solution, they have full control over all security issues. They effectively determine themselves how data is stored, backed up and protected. This enables the implementation of individual and customized security concepts, but at the same time requires in-depth expertise and constant support from the company's own IT department.

This analysis clearly shows that in a direct comparison of SaaS vs. on-premises, on-demand booking of software solutions has the proverbial edge in many areas - especially when it comes to flexibility and cost predictability. This is also reflected in the economic practice of companies.

According to the “Cloud Report 2024” published by the digital association Bitkom, many companies want to use cloud computing services even more intensively than before, for example to switch to PaaS or SaaS. Key motivators include cost reductions (61%) and an increase in IT security (57%).Setzen Unternehmen auf eine On-Premise-Lösung, so haben sie an der Stelle die volle Kontrolle über alle Sicherheitsfragen. Sie bestimmen effektiv selbst, wie Daten gespeichert, gesichert und geschützt werden. Dies ermöglicht die Umsetzung individueller und maßgeschneiderter Sicherheitskonzepte, erfordert aber gleichzeitig fundiertes Know-how und ständige Betreuung durch die eigene IT-Abteilung.

SaaS vs. On-Premises - Advantages & Disadvantages at a Glance

In this section, we want to highlight the most important advantages and disadvantages of both concepts in a compact and clear manner:

Concept	Advantages	Disadvantages
SaaS	Fast deployment without complex installation Low entry costs due to usage-based billing Maintenance and updates by provider Location-independent access possible Enormously high scalability and flexibility Own SLAs possible in many cases	Possible dependence on the provider (vendor lock-in) Cloud services always rely on the internet Limited data sovereignty and only limited customizability
On-Premises	Full control over data, systems and infrastructure Extensive customization options No dependence on Internet access Secure suitability for companies with strict compliance requirements	High initial investment Complex and time-consuming implementation Requires internal expertise for maintenance and security Limited scalability without additional investment

Both concepts have their own strengths and weaknesses - the decisive factor in the final decision is what is particularly important for individual companies.

SaaS or On-Premises: Which Solution Suits the Company?

Before companies decide on one of the two options - or a hybrid solution - they should thoroughly examine their own current and future IT requirements. An example of such an internal analysis could be as follows:

As-is Analysis
As a first step, companies should look at the state of their own IT - both in terms of the technical IT infrastructure and regarding the specific IT expertise in the department or company.
Budget Planning
Companies must examine the conditions under which hardware and software can be purchased and the foreseeable period over which they can be used. Both the one-off purchase and ongoing costs for maintenance and servicing must be factored in.
Importance of Features
Are there certain features that must be included in a software solution? Is the necessary expertise available to create these features yourself if necessary? Or is it more cost-efficient to purchase certain functions from the outset?
Security Considerations
Depending on the industry, particularly strict data protection regulations (GDPR) may apply. These must also be considered in planning. Setting up certain security measures can be prohibitively expensive for individual companies, while these are part of the core business for cloud service providers.
Test & Integration
Whether SaaS or on-premises - ideally, both concepts should be used in a limited test scope in your own company. This allows companies to gain an impression of the respective solution and better assess which solution is likely to hold its own in everyday working life.

At GFOS, we are your partner of choice for trend-setting decisions within IT. We support companies in finding the optimal solution for their own needs when it comes to the question of SaaS vs. on-premises. Because we offer our customers powerful SaaS solutions from the cloud - customized and powerful.

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Cloud Computing Software as a Service