On-premises vs cloud CRM and business software: where should it run?
A CRM, an ERP or a scheduling system can run on servers in your own building, on virtual machines rented from a cloud provider, or as a SaaS subscription that someone else operates. In the browser it may look the same in all three cases. What changes is who buys the hardware, applies the patches, tests the backups and answers the alert at night.
Should business software run on premises or in the cloud?
Quick answer
On-premises vs cloud CRM and business software is a question of who runs what. On premises, your team owns hardware, patching, backups and security. In IaaS, the provider runs the hardware and you run the rest; in SaaS, the vendor runs the application too. Agnotic Technologies maps each system against those duties before recommending a model.
| Criterion | On-premises | Cloud (IaaS or SaaS) |
|---|---|---|
| Hardware and server room | You buy, house, power and replace it | IaaS: the provider. SaaS: the vendor. |
| Operating system patching | Your team | IaaS: your team. SaaS: the vendor. |
| Application updates | Your team, on your schedule | IaaS: your team, on your schedule. SaaS: the vendor, on its release schedule. |
| Backups and restore tests | Your team designs, runs and tests them | IaaS: you configure the provider's backup services and test restores. SaaS: the vendor backs up the service; confirm export and restore options for your data. |
| Security monitoring | Your team, across hardware, network and application | IaaS: the provider for infrastructure, you for the operating system and application. SaaS: the vendor for the service, you for accounts and settings. |
| Identity and user access | Your team | Always yours: who has an account and what each account can do. |
| Data location | Wherever your servers are | IaaS: the regions you choose. SaaS: the regions the vendor offers; check before you sign. |
| Customization | Unlimited, at your cost | IaaS: unlimited, at your cost. SaaS: what the vendor's settings and APIs allow. |
| Connectivity | Keeps working on the local network if the internet drops | Needs a dependable internet link; plan for outages. |
What they are
What is On-premises
On-premises software runs on servers you own or lease, in your building or a colocation facility. Your team, or a contractor, buys and replaces the hardware, patches the operating system and the application, runs backups, watches security and keeps the network up. You get full control and full responsibility.
What is Cloud (IaaS or SaaS)
In IaaS you rent virtual machines, storage and networks from a provider such as AWS, Microsoft Azure or Google Cloud, and run your own or custom software on them. In SaaS a vendor runs the whole application, such as a cloud CRM, and you configure it. NIST SP 800-145 names SaaS, PaaS and IaaS as the three cloud service models.
Key differences
Who is responsible for what in each model?
Microsoft's shared responsibility guidance states that in an on-premises datacenter you own the whole stack, and that some responsibilities transfer to Microsoft as you move to the cloud. AWS describes the same split as security of the cloud, which AWS protects, and security in the cloud, which depends on the services the customer selects. Google Cloud adds that the model requires an in-depth understanding of each service you use. In every model, your data, accounts and access settings stay with you.
Is a web-based app the same as a cloud-based app?
No. The two terms answer different questions. Web-based describes how people reach the software: through a browser. Cloud-based describes where it runs: on a provider's infrastructure. A web application can run on a server in your office, and a cloud-hosted system can have a desktop client. When comparing web based vs cloud based apps, ask both questions separately.
How much control do you give up?
In SaaS you configure what the vendor allows, accept its release schedule and work within its API limits. In IaaS you keep control of the software but rely on the provider's infrastructure. On premises you control everything, including parts you would rather not run. For a CRM, our SaaS CRM implementation page covers when to configure, extend or build.
Where does the data live, and does it matter?
Contracts, sector rules or customer demands can set where data may be stored. On premises answers that by default. In IaaS you choose the regions. In SaaS you depend on the regions and export options the vendor offers, so read its data processing terms and test an export before you sign.
What drives the cost in each model?
On premises: hardware bought up front, replacement cycles, space, power and the staff time to run it all. IaaS: usage billed monthly that grows with the workload, plus the staff who run the operating system and application. SaaS: subscriptions per user or tier, add-ons and the integration work around them. Compare the total over the system's life, using your own numbers.
What do private, public and hybrid cloud mean?
NIST SP 800-145 lists four deployment models: private cloud for a single organization, community cloud for a group with shared concerns, public cloud open to the general public, and hybrid cloud combining two or more of them. A server room that offers self-service, metered virtual machines can be a private cloud; a rack of servers managed by hand is simply on premises.
When to use each
When to use On-premises software
- Systems that must keep working when the internet link is down.
- Software that talks to on-site equipment with tight latency, such as machines, scanners or lab instruments.
- Contracts or rules that require data to stay on your premises.
- Recent hardware with years of life left, and staff who run it well.
When to use cloud hosting
- IaaS: custom software you want to own without running a server room.
- IaaS: workloads with changing demand that benefit from adding capacity on request.
- SaaS: standard processes, such as a sales pipeline, that an existing product already fits.
- SaaS: teams without staff to patch, back up and monitor servers.
How do you decide, system by system?
1. Must it run when the internet is down? If yes, keep it on premises or design a local fallback.
2. Does it talk to on-site equipment in real time? Keep that integration close to the equipment, even if the rest moves.
3. Does a SaaS product already fit the process? If the process is standard, configure SaaS before building anything.
4. Is the software your own or heavily customized? Host it on IaaS or PaaS, so you keep control without owning hardware.
5. Where must the data live? Rule out any option that cannot meet it.
6. Who will patch, back up and monitor it? If nobody on staff can, prefer the model where someone else does.
7. How would you move out? Check export formats and contract terms before you commit.
Most companies end up hybrid: a SaaS CRM, custom software on IaaS and a few systems on premises next to the equipment they serve. Our cloud migration and modernization page covers moving between models.