SaaS vs On-Premise: Which Is the Best Fit for Your Business?

Navigating the complex world of software solutions for businesses, the debate between SaaS (Software-as-a-Service) and on-premise systems is more relevant than ever. Understanding the distinction between Software as a Service (SaaS) and on-premise software is crucial for businesses charting their digital journey.

Whether you’re starting a new online store or planning to invest in new sales channel to double your revenue growth, you need a fully-fledged ecommerce platform to do so. If you select the wrong platform, it impacts your brand reputation and incurs heavy costs in setup and eventual migration to a modern platform. While many different types of ecommerce solutions are available in the market, deciding the right one for your business needs careful evaluation.

Read on this blog to understand what SaaS-based ecommerce is and how SaaS solutions outweigh traditional on-premise solutions.

Understanding SaaS and On-Premise Software

Ecommerce platforms are divided into SaaS ecommerce (Software-as-a-Service) and On-premise.  SaaS, a cloud-based model, offers the convenience of remote accessibility, automatic updates, and scalability, making it an attractive option for organizations seeking flexibility and cost-effectiveness. On the other hand, On-Premise Software provides greater control, customization, and data security, making it a preferred choice for industries with stringent compliance requirements. Some examples of on-premise solutions include Magento, WooCommerce, etc. while SaaS ecommerce platforms include Shopify Plus, Salesforce Commerce, Sitecore, etc.

Before we dig further, let’s understand both of these models and then will go in detail about what makes one popular for SMEs and enterprise businesses.

On-Premise Ecommerce Solution

An on-premise solution is one that you purchase from a vendor and install it on your own server or intranet. This means that all the data will be stored in your own servers and maintained by you, which gives you complete control over the data. You can decide how much space and resources will be allocated for this purpose as well as how much security should be provided for it.

If you choose on-premise ecommerce software, you will have to install it on your own server or computers at your business location. This means that there is always a possibility that something could go wrong with the system and cause all of your data to be lost. In addition, if you need upgrades with the system or extra features, they can often take time and cost money.

SaaS Ecommerce Solution

Software as a Service (SaaS) is a software delivery model in which the software and related data are centrally hosted on servers owned by the vendor, and customers access the application online through a thin client interface such as a web browser. The consumer does not have to install or update any software, but uses the service as an external application. The consumer also does not need to be familiar with the internal structure of the application, because the vendor maintains it.

SaaS appears to be capable of reaching even greater heights in the next few years. By 2026, the SaaS industry market size is predicted to reach $280 billion, according to the Digital Economy Compass report.

How SaaS Ecommerce is Different From On-Premise Solution

The ecommerce industry is growing by leaps and bounds, and this growth is expected to continue for the foreseeable future. By 2028, the industry is expected to be worth $99 billion, up from $9.7 billion in 2020. - Allied Research Market

The problem with this growth is that not all companies have the resources or expertise to handle it independently. They need a solution that can scale with their business as it grows, and they need it now. That's where Software-as-a-Service (SaaS) comes in.

“It is estimated that 85% of business applications will be SaaS-based by 2025.” - State of SaaS

One of the primary distinctions between SaaS ecommerce and on-premise solutions lies in their deployment models. SaaS platforms are hosted and maintained by third-party providers, allowing businesses to focus on their core operations while leaving software maintenance to experts. This results in shorter time-to-market and a more predictable cost structure, as subscription-based pricing is common with SaaS solutions. In contrast, on-premise solutions require businesses to invest in server hardware, software licenses, and IT resources for ongoing maintenance. While this approach offers complete control over the software environment, it can be resource-intensive and time-consuming.

Another crucial differentiation is scalability. SaaS ecommerce platforms are designed to accommodate businesses of all sizes, offering the flexibility to scale up or down as needed. This scalability is especially valuable for startups and small businesses looking to grow without significant upfront investments. On-Premise solutions, while providing customization options, may require additional hardware and software investments to accommodate growth, potentially making them less agile in adapting to changing business needs. Ultimately, the choice between SaaS ecommerce and on-premise solutions hinges on factors like budget, IT capabilities, and scalability requirements, as each approach brings its own set of benefits and considerations to the table.

SaaS Solutions Outweigh Traditional On Premises. Here's Why?

In considering the future of online retail, it's crucial to weigh the merits of SaaS ecommerce against on-premise solutions. SaaS ecommerce platforms offer significant advantages for businesses looking to launch or expand their online presence. These benefits include reduced upfront costs, as there's no need to invest in expensive infrastructure or software licensing. With the expertise of ecommerce consulting firms, businesses can navigate the myriad of available SaaS options and tailor a solution that best fits their needs.

Online store development is becoming more streamlined with SaaS, providing a faster route to market and easy scalability to accommodate business growth. In contrast, on-premise ecommerce solutions, while offering complete control and customization, come with higher initial costs and require continuous maintenance. As ecommerce platforms evolve, the agility, efficiency, and cost-effectiveness of SaaS benefits are making them an increasingly popular choice for businesses of all sizes.

There are several advantages of using SaaS ecommerce over on-premise solutions including:

Cost Savings

Hosted solutions typically cost less than self-hosting your own solution because you don't have to pay for hardware and software maintenance. And since SaaS providers handle most of the day-to-day operations of managing the website development, you'll also have fewer IT resources to allocate to maintenance tasks.

Scalability

Suppose your business grows rapidly or suddenly sees a surge in sales volume. In that case, a hosted solution gives you the ability to scale up quickly without having to invest in additional hardware or software licenses. This helps prevent downtime during busy periods when demand spikes or during unexpected spikes in traffic that may result from negative publicity or other factors beyond your control.

Better Performance

Cloud platforms typically perform better than on-premise solutions because they're built to handle large amounts of traffic at once. They also offer more scalability options so that you can grow your business without buying more servers or upgrading your infrastructure regularly (though this can come at a higher cost).

Flexibility

SaaS Ecommerce is built to sell any type of product, so your store doesn't need to be limited by the products you're able to offer right now. If you want to start selling different products later on down the line, it's easy enough to change the types of products available in your store without having to incur additional costs or hassle. This means that even if you're starting out as a small business with limited resources and capital, it's still possible for you to grow your business without needing an upgrade in software or hardware equipment anytime soon.

Enhanced Security

Security is one of the biggest advantages of SaaS ecommerce platforms as compared to on-premise solutions because they're hosted in secure data centers instead of your own office space or home office. This means fewer security threats when hackers attack —because they're attacking a hosted solution instead of your own servers. Security is also easier to manage because you don't need to hire an IT professional to keep your software up-to-date on patches and other security measures.

Access From Anywhere

With SaaS, you can access your store from anywhere with an internet connection, so you don’t have to worry about maintaining servers or keeping them updated with security patches. You also don’t have to worry about having enough storage space for all your customers’ data because it’s stored on a central server instead of locally on their devices.

Easy Integrations

SaaS ecommerce platforms are easy to use and integrate into your website. With API first approach, your integration with existing backend systems is never compromised. On the other hand, extensive versioning on on-premise may impact your integrations and can cause lengthy & costly delays. With SaaS, you’re always on the latest version and have latest features and functions available. In addition, you don’t have to wait for years to get bugs and security holes fixed due to version migration like in on-premise systems.

Easy Installation and Setup

Most SaaS eCommerce platforms make it easy to install and set up your store within minutes using a simple wizard interface. This eliminates the need for technical knowledge or training because most platforms come preloaded with all the features you need to run an eCommerce store. Using a simple drag-and-drop interface, you can also easily add new features and functionality as your business grows.

The Future of Ecommerce

With massive growth in the B2B software market, it makes sense for businesses to invest more into SaaS eCommerce solutions. But what does that mean for the future of on-premise software? Well, simply put, it's that—for better or worse—the on-premise software market may be in decline phase.

The days of having to commit to a big investment in hardware, software, and technical support are gone. It's much faster, simpler and cheaper to get your business up and running quickly with SaaS eCommerce. As SaaS products continue to evolve, it won't just be small businesses that will benefit; larger companies will now be able to host their own ecommerce stores more efficiently.

With Software-as-a-Service solutions, companies benefit from the fact that they don't have to pay for additional storage, software licenses, or hardware. Plus, there's no need for expensive maintenance contracts or staff training. When you add it all up, SaaS solutions are a wise investment for businesses of any size that need to scale their operations.

For more helpful tips, advice, and best practices on how to improve your B2B commerce, start a conversation with our Ecommerce Service experts.