Supply Chain Insights has just started a six month Putting Together the Pieces study on demand planning solutions. This report series provides guidance to supply chain leaders in their technology selections.
As we were preparing the questions to ask demand planning solutions providers, I realized I wasn’t quite clear on the differences between software deployment options. I thought I was pretty familiar with Software as a Service (SaaS), as this was the type I implemented in my previous role, but I was a bit unclear about the differences between hosting the software versus accessing the software on the cloud versus SaaS.
During my research of the deployment options, I remembered back to when I was a Quality Engineer working on a project to implement a new laboratory information management system (LIMS) with the potential to expand it globally. The Vice President of Quality was very concerned about the server storage and scalability of the solution. At the time, the significance of the server structure was completely over my head… but it makes sense now!
So let’s start with what we’re likely most familiar with, on-premise software. On-premise means that the software you have purchased will be implemented using your computers and servers on site. In the case of remote employees, they can login via VPN to get access to the internal server network to run the software.
The up-front costs for this kind of implementation are high because you have to provide the IT personnel and the server infrastructure, as well as purchase the software. Once the software is implemented, when there is a version update, you would have to pay for the updated version and ensure that it is installed on all of the computers using the software.
The next evolution of software deployment is a hosted software. Hosted software means that you still own the software and must purchase and install subsequent versions on all of your computers, but you don’t manage the servers that store all of the information or perform the computing. The servers are managed by a third party that allocate servers to your company. Scaling up may require the purchase of an additional server, similar to on-premise, and thus is also time-consuming.
The cloud is a pretty broad term for a bunch of servers that could be located anywhere, that all house your data or do your computing. The cloud could be managed by any third party. They own the servers, and you pay them to store your information and perform computing on their servers. You access the cloud – or the data/information in those servers – simply by using an internet-based application. When you have all your pictures stored on Google Cloud, for example, they are being stored on Google’s servers all over the world, and you can get access to your pictures by logging online.
Cloud-based software deployment is similar to cloud-hosted, in terms of the data storage and computing being done on the cloud, but in the case of cloud-based, the software was designed to optimize server usage. During peak times, additional server power is used, during low times the additional server power can be used for other things. This way, you pay a bit less since you likely only pay for what you use. It is a small distinction between cloud-hosted and cloud-based, but if a solution is cloud-hosted, the servers are not optimized for usage as they are in the cloud-based solution. In both cases the servers are located in the cloud, however, making scaling up much easier.
Software as a Service (SaaS)
Software as a Service is an application of the cloud. Again, a third party owns and maintains the servers, but in addition, they own and maintain the software. You pay to have access to this software, the third party will maintain the software, ensure bugs are fixed, and update the version. You pay an ongoing service fee for the people in your company who need access to the software.
When you own the software yourself, you can typically do quite a bit more customization that you would with a common service like this where everyone is on the same version. With SaaS, you can more quickly implement the software and more easily scale-up your usage.
Lora Cecere wrote a blog entitled, “Clouds: A Beautiful Thing For Sure!” In this blog she talks about the movement of supply chain software to cloud-based solutions. She summarized a few differences between the deployment options as follows: “While the more traditional vendors have repackaged their software into hosted solutions, this is not a true Software as a Service deployment. The difference? The primary difference is in the definition of the word ‘service’. In a SaaS model you use the software; whereas, in a hosting agreement you own the software. In a hosted model there is very little difference than on-premise with the exception of where it is physically located and who maintains it. There is still a need for maintenance outages and software upgrades and it is not as easy to deploy to third-party participants on the value network.”
This point Lora makes about deploying third-party participants on the value network is a good one for those focused on integration with supply chain partners.
I have heard of hybrid options as well, where part of the solution is on the cloud and part is maintained on-premise. A lot of the discussion with this has to do with security, on-premise (private) servers being less subject to a data breach.
Describing the software deployment options is a lot easier than choosing one! After digging into the basics, I understand the appeal of the solutions that are cloud-based. You can optimize server usage while letting someone else deal with the maintenance of the physical servers. Security concerns and high ongoing costs would be the reasons not to go with these solutions. SaaS makes it even easier to implement the solution because you don’t own or maintain the software. You may not choose SaaS because of on high ongoing costs as well, or you may want to create a more customized solution, utilizing internal IT resources for troubleshooting and project support. I’m looking forward to exploring these deployment options further during the demand planning solution study!