Software vs. Hosted Services

All prosperous businesses will eventually outgrow their IT infrastructure.  As demand increases, most small to medium sized businesses are faced with the choice of boosting their infrastructure to host increased capacity and services; or outsourcing all or part of their technology.

What do you need to know to make an informed decision?

Benefits of using In-House Software:

• Total control over data and infrastructure
• Less chance for a security breach
• Immediate response time in problem situations
• Grow-as-you-go, purchase only what you need for the immediate future
• Software can be configured to better suit your company’s needs
• No outside party to interact with, saving routine time and money
• You control permissions and data access authorization
• Over the long run, you can control your costs

Downside of using In-House Software:

• Multiple packages can be a headache to maintain and update
• Must have IT staff to maintain network and services, staff may not be fully utilized
• May need to retain consultants for customizations
• Some systems require in-depth technical knowledge, thus a specialist
• Initial outlay for equipment, software, staff and training may take time to recoup

Benefits of Hosted Services:

• A hosted service provider can achieve economies of scale for common aggregate services
• Providers operate multiple data centers that are physically secure
• Companies can utilize the features and functionality of best-of-breed services
• Hosting provider can reduce compliance costs
• Pay-as-you-go pricing for these services
• Convenience of someone else managing the processes
• Unnecessary network traffic is eliminated

Downside of Hosted Services:

• Loss of local control over critical infrastructure
• Vying for attention and service among all of the hosting company’s other customers
• Insecure delivery reliability (the service provider is another hop on the path)
• All data is in the hands of 3rd parties creating a possible security risk
• Inability to immediately act on a decision
• Long-term cost may prove more expensive than purchasing a software solution
• Lock-in: once you start putting your data in other people’s hands it’s hard to get it out

While Hosted Services and Software As A Service (SaaS) are gaining ground among large enterprise seeking to lower costs, offload their IT work, and match the growth of the sector without having to change their infrastructure, most SMBs will find hosted services to be less useful. SMBs, even with minimal IT support, are able to manage their own data and so their business, using in-house networks and a suite of packaged software. Of course return on Investment (ROI) will depend on company size, volume of work and expected near term growth. For many SMBs, however, throughout most of the company’s life cycle, the cost of oursourcing IT will be greater than the benefit gained.

Find out about Software vs. Appliances