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Installed Software Versus Software As A Service

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Business software comes in many different flavors. Whether you’re looking for something fast and easy to use, or something more robust and flexible, there’s a software model to suit your tastes. The two primary deployment options are the traditional installed approach and the increasingly popular (but still less common) Software as a Service (SaaS) approach. These two models offer different advantages and disadvantages to their users.installed vs saas

Installed Software

Installed software has been the primary delivery method software vendors use to distribute their product to end users. Under this model, users pay a fixed license fee (with an optional yearly maintenance fee) for a piece of software which is then installed on their own hardware.

Advantages of installed software

Installed software has distinct advantages over SaaS platforms. Because it is located on-site, installed software is often more customizable and allows for stronger and more in-depth integration with other IT and operational systems. This degree of control is a strong selling point for firms needing very specific features and tasks from their software application. The ability to modify a software package on-premise can be the best option if you can’t find exactly what you need anywhere else.

Additionally, the opportunity to directly control the data, security and processes relating to the software is a strong point in favor of the traditional licensing model. Keeping content on-site enables you to better know who is accessing client data, what specific security measures are being used and how effective they are, and facilitates a potentially less stressful migration of data to new systems.

Disadvantages of installed software

SaaS proponents are quick to point out the flaws of the traditional software model. First among these are the large upfront costs it requires. Licensing fees aren’t cheap, and on top of these are hardware costs, IT infrastructure costs, training and support costs and upgrade fees. This can make the Total Cost of Ownership (TCO) of the software prohibitive for many businesses. Defenders of installed software point to the advent of leasing, which has helped companies to reduce these initial capital expenditures and spread the cost out over the life of the equipment.

Aside from wallet lightening, traditional installed software also suffers from time constraints. Installing and delivering licensed software can be a lengthy process. Time spent training users on the system and integrating it with existing IT structures can be a drain on company resources and represents another facet of the large upfront “investment” required for installed software.


Software as a Service foregoes the traditional method of selling a perpetual software license to end users and requiring them to host, run and manage the program they just bought. In place of this method, SaaS vendors host the application on their own servers, make it available through the web and charge for the service of accessing and using the solution.

Advantages of software delivered as a web service

The advantages of accessing enterprise software solely from the web are many. Because the software is already put together and installed, it’s usually faster to get it up and running for your company. Since you don’t have to bear the cost of maintaining and upgrading the software, it is cheaper (at least in the short run) and can allow you to spend less on IT personnel. Also, since SaaS vendors receive payments from you on an ongoing basis (instead of a large lump sum upon purchase followed by optional service fees, as in the traditional software model) they have a vested interest in providing you with good service, lest they lose your revenue stream. This can translate into more upgrades and faster customer service. Finally, because most of us are accustomed to using the Web, SaaS programs are often more user-friendly.

Security concerns, often cited as a worry with SaaS applications, could actually be a strong selling point for the model. While traditional installed software compels companies to provide their own protection for data, security for data hosted in a web-based program is the responsibility of the SaaS vendor. This allows them to take advantage of economies of scale for data protection that small to midsize business cannot. Counter-intuitively this may mean that security from external attacks for data stored with hosted applications is actually greater than a company could manage on-premise.

Disadvantages of software delivered as a web service

There are several disadvantages of SaaS to consider when deciding between the different software models. By ceding ownership of the software platform to a third party, you lose a degree of control over the software and how you implement it. This means customization and modification of the application are more limited. Also, by entrusting the application to a vendor, your well-being becomes intimately tied with theirs. Problems on their end could jeopardize your enterprise platform. The reliability of your internet connection also takes on a higher degree of importance if all the information from your software is hosted online. Additionally, while the reductions in setup and IT overhead costs are a clear advantage of SaaS, paying periodic subscription fees could be more expensive in the long term than paying up front for a traditional software package.

Internal security with a SaaS solution is also a concern. While it may be true that SaaS vendors are able to safeguard information from outside attackers more efficiently than most businesses do for their own on-site data, other issues can arise. Specifically, by entrusting data security to a third party you risk losing your data if the third party becomes insolvent, or has other internal problems which your own firm does not. Hosting data off-site can also lead to problems if you decide to switch SaaS providers and need to migrate the data to a new system.


So which model is right for you? It really depends on your needs. How important are the following: time to market, customization, security, short and long-term costs and remote access? Answering these questions will help you make the right decision.

Looking for Purchasing software? Check out Capterra's list of the best Purchasing software solutions.

About the Author

JP Medved

JP Medved

J.P. was formerly content director at Capterra.


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