I’ve heard arguments for both on-premise and cloud-based software solutions. Each side makes convincing arguments, however, the decision should be based on a number of factors. It is clear to me that one type of deployment does not meet all needs. The top-down items that should be considered typically fall into one of 6 categories; security requirements, internal IT support and IT management solutions to administrate a solution, customization, initial capital expense, ongoing cost per head and integration to third party software.

Security

Does your company have a specific need to maintain the highest level of security? Is your firm warehousing confidential information, personal credit information, healthcare information or other intellectual property? I find that some cloud based offerings place restrictions and schedules on data access and maintenance that may make it troublesome for some business requirements. If high security is paramount to your business, on premise is the easiest (not the cheapest) to secure.

Internal IT Staff

On premise solutions will require on staff technical expertise to administrate, manage and support. How many resources will your firm need to manage the solution? Cloud-based solutions mitigate the need for full time IT staff.

Customization IT management solutions

Many cloud-based solutions are offered in a multi-tenant environment meaning that customizations that your firm may need might not be suitable for a multi-tenant scenario. Private PODs or single instance deployments at a cloud service provider may be suitable for your needs. Private PODs can be costly therefore it may be more economical to deploy on premise to accommodate customization.

Initial Capital Expense

This is the most compelling reason that senior management, especially, CFOs like the cloud solution because of the low initial capital expense normally required to deploy a cloud-based solution.

Ongoing Cost per Head

Cloud-based solutions will always attract a monthly cost per agent, per head or some other commonly used financial model. This decision is mostly made based on financial condition and capital structure within the firm. I typically see that companies want to conserve cash and opt for the operation expense of a cloud-based solution.

Integration to Third Party Software

The answer to this resides in the architecture of the software regardless of on premise or cloud-based. If an application has a published API or other mechanisms (Web Services) to integrate with, I’ve found that both cloud-based and premise based solutions are equally effective. The only caveat to the cloud-based configuration is how accessible is the facility manager in allowing you direct access to the core application.

IT staff will always be needed to manage and administrate most any enterprise system, so I don’t normally see this item giving much weight to these decisions. At a very high level, if tight security, customization without serious concern for a reasonable initial capital expense, I typically see management selecting an on premise solution. The other side of this is that if reasonable security is acceptable, and initial capital expense is a major factor in selecting a solution, then I see management selecting cloud-based solutions. Integration to third party legacy systems that are ingrained into a business may force a decision to one or the other regardless of the previously discussed benchmarks.

Choosing the right system deployment is important to any business. Be sure you understand the benefits and concerns of each option before making your decision.