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On-Premise, Hosting and Saas, What Does It Mean for Your Technology? (Part 2 of 3)

Kim Anselmo - Tuesday, March 04, 2014

by Kim Anselmo, The Resource Group

In our previous blog we discussed the benefits and challenges of on-premise technology for your business. Today, we will dive into hosting and how it applies to your financial management technology.

Hosting = Lease

In a hosted environment you typically own (or license) your software and you allow someone else to provide the computer equipment to run it. The computer equipment resides at the hosting company’s facility and you access your software over the internet or “on demand”. Just like an office or factory building lease, you can design the environment, you have exclusive access to it, the building is maintained by the property owner or manager but you are responsible for the use of your space and its contents. With a hosted computing arrangement, you specify and design the needed computer equipment (the environment), you have exclusive access to the equipment, the facility that houses the equipment is maintained by the hosting company (the landlord or lessor) but you are responsible for the software, the maintenance of your software and the related data.

In a hosted scenario it is possible to have different arrangements with regard to ownership of the computer equipment. In some cases, the hosting company will provide the computer equipment and all related maintenance. They will typically support the equipment and include the maintenance and support costs with your regular monthly fees. In other cases, you may purchase your computer equipment on your own and allow the hosting company (the landlord or lessor) to house it and maintain it for you.

In a hosted environment it is important to remember that the software, for all practical purposes, is yours and you access your software on-demand (via the internet). Some hosting companies will provide assistance with the maintenance of your software, but one copy of the software is installed on the computer equipment and it is yours to access and maintain. Software upgrades and maintenance are still your responsibility and you may or may not be able to get assistance with the software maintenance through the hosting company depending on their capabilities. Typically, software implementations, maintenance and upgrades are as costly and challenging in a hosted environment as they are in an on-premise environment.

The costs related to a hosted scenario are similar to that of an office lease. You pay a monthly rental fee for the facilities and the related maintenance (e.g. the building) but the contents are yours to maintain and manage (e.g. the software). Depending on whether or not the hosting company provides the computer equipment or you buy it, the costs for housing and maintaining the equipment can be expensive, coupled with the upfront costs for purchasing software licenses and optionally computer equipment. Remember, in this model you will have an ongoing, recurring cost for your hosting fees. Companies that may be best suited to a hosting environment include organizations experiencing rapid growth. Next time, we will discuss the benefits of a SaaS environment for your company’s financial management system. 

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