Is the on-premise model dying a slow death?

by Abhinna Shreshtha    May 27, 2010

With concepts like cloud computing and SaaS gaining popularity, the traditional way of using business applications seems destined to fade away

Let’s take the case of ERP — for years considered to be something of a problem child of IT. Though, an essential part of an organization’s IT jigsaw, its usefulness has been offset by the high costs typically involved with an ERP project. The financial ramifications of ERP investments were even more highlighted in last year’s recession as organizations began to consider the wisdom of investing on on-premise business applications, especially ERP.

And this brings us to the concepts of software-as-a-service and cloud computing. In the past few years, much has been discussed about the concept of using the Internet to provide applications and services to companies. Though the proponents of the cloud, say it is the future, not many, are really sure of what this future will be.

Will we have on-premise business applications dying a slow death as organizations, in their rush to save costs, start depending on applications delivered over the cloud? Or will we see a scenario where non-core operations like database will be moved to the cloud, with companies preferring to keep systems like CRM, BI, ERP, etc. with them.

The future of cloud computing and with it enterprise applications like ERP seems to be, to use the pun, in the ‘air’.

The growth that SaaS and indeed cloud computing has seen in recent times has been in a large part due to interest from ‘new age’ organizations and SMBs, who seek to become more agile. The recession also made it imperative to save money and SaaS came up as an ideal alternative. But will organizations continue to place their trust and their data on the cloud and how far will they go with this trust?

A recent study by Springboard says that the SaaS market in India is expected to rise to $352 million by 2012 from $105 million in 2009. Also, as per the report, 32% of SaaS adopters in India are replacing an on-premise application. In fact, research from most firms paints a rosy picture of SaaS.

Software biggies like Oracle, SAP, Microsoft, CA, etc. are also investing big in cloud computing and on-demand services in a bid to a successful business model.

So what does the future hold? As things stand right now, it does seem that the on-premise model is getting outdated as organizations bin to realize the benefits of moving to the cloud. A major factor that could decide the future of SaaS and cloud computing is adoption by large organizations. With major IT players already showing an interest, this could be just the push that these disruptive new technologies need. Whether, on-premise deployments will stop completely remains to be seen, though it does not seem likely at least not immediately.

However, like all disruptive technologies, SaaS and cloud computing need time so concerns like security, scalability, etc can be ironed out. One major factor could be how SaaS players manage to maintain consumer trust. For a new concept, it will require just one big blooper to start people having second thoughts about it. The future does seem to be on the cloud, but both end-users and vendors will need to go about it in a planned and systematic manner.