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SaaS Won't Kill On-Premise Software - Take Two

SaaS Won't Kill On-Premise Software - Take Two

When it comes to choosing SaaS (software as a service) or an on-premise solution, one size does not fit all. Indeed, enterprises and small businesses have different IT needs and considerations. As a managed service provider, here are some key issues you need to keep in mind as you formulate your own SaaS, cloud and on-premise solutions.

MSPmentor touched on the cloud vs. on-premise debate back in March. But let's take a closer look. Cloud services are only of value if (A) the service provider gains profitable economies of scale and (B) the customer benefits from reliable, cost-effective shared services.

For instance, large system integration and outsourcing companies like HP, Unisys, Capgemini and CSC exist to manage enterprise complexities. They leverage established technologies and processes that make it cost efficient to take these services out of individual enterprises and put them into a "cloud."

Whether it’s network monitoring, desktop management or transaction processing – if the capability that is being outsourced subscribes to a set of industry specifications and processes without requiring much corporate customization, it is a good candidate for outsourcing.

Issues addressed for customers include:

  • Managing infrastructure complexity,
  • cost reduction through economies of scale; and
  • capital outlay (or infusion of cash if assets are being acquired).
All the major outsourcing players in this space have vertical industry practices and overlay varying degrees of industry-specific support around security, auditing, compliance, etc. into their outsourcing services portfolios.

What’s Your Core Competency?

As an MSP, you need to think like your customer to understand what types of cloud services may interest them. In other words, you need to understand their core competencies.

Enterprises with 50,000 employees would not consider IT infrastructure to be a core competency, but often it is their IT department’s deep understanding of their business unit and end-user IT requirements that drive needed changes from their outsourcing provider. Those changes often become industry best practices over time.

Operating IT on a daily basis may not be a core competency. However, those large enterprises intimately understand the business value of IT to their companies and aggressively drive their outsourcing partners to deliver to that vision. They can pay management and IT consultants to infuse outside thinking. They are not significantly resource constrained. It is the economies of scale and reduction of complexities around IT operations that drive the most significant value for them to consider outsourcing and “cloud” services.

Big Opportunities In Small Business

The issue of core competency points to a different set of requirements for very small businesses (VSBs) and SMBs. With fewer resources across the board, those companies are looking to their MSP partners to enable their businesses by supporting their PCs and networks, providing email, backup, etc.

This is not about complexity – this is about utility-level IT services that are like running water and electricity to a business. Most VSBs and SMBs don’t have the time, personnel and/or expertise to define and provide their own IT services. They rely on their trusted MSP partners to provide both the management and technical oversight to define and run their IT operations based.

It has been commonly thought for many years that VSBs and SMBs would be most significant beneficiaries of cloud-based services. Barriers to entry for small businesses are being reduced by the enterprise-class capabilities that are provided by cloud services providers. MSPs can incorporate those services in their portfolios and extend the value of their management relationships with their customers.

Thanks, But No Thanks

Of course, some customers will never abandon their on-premise solutions. The reasons vary from practical to emotional considerations.

For instance, does the customer:
  • Have significant data access /auditing requirements that are easier to manage in their own environment?
  • Want to retain physical control of their data?
  • Think of their IT infrastructure as part of their business value?
  • Manage risk objectively?
  • Have a conservative IT culture?
One size does not fit all. The cloud is here to stay and its utility will grow over time, but does it have to be either/or?  We believe at Datacastle ( that you enable the capability, and let your partners work with their customers to decide the implementation option that best suits their needs.

Lori Marshall DatacastleLori Salow Marshall is VP of Marketing & Business Development at Datacastle Corporation, a SaaS data security solution provider serving managed service providers worldwide. Guest blog entries such as this one are contributed on a monthly basis as part of’s 2009 Platinum sponsorship.
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