Software Technology

Understanding Cost Factors in On-Premises vs. Cloud Customer Service Tech

Cost is a key factor in deciding whether to go with on-premises or cloud technology. Here’s what you need to know.

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Choosing the right technology for your customer service needs can speed up your delivery, improve the employee experience, and help your business stand out in a positive way. However, companies face a number of choices—including whether to self-host an on-premises solution or invest in a cloud provider. Cost can be a major factor in deciding which direction to choose. Here are some key considerations when you’re weighing your options.

Hardware costs: With on-premises software, your software and data are stored in your own data center. That means they’re on-site in your building or in a physical location you’ve selected. This level of control can fit better with some companies’ approach to security. However, it also means that from an upfront perspective, you’ll need to have the servers and networking equipment needed to support those storage needs. Providing that support may mean paying to repurpose existing hardware or buying new equipment, depending on the resources you have available.

Software costs: When considering software costs, the key difference between an on-premises solution and a cloud solution is how and when you pay. When you host your own software, you tend to pay once for the upfront cost of the software, which you then install. Future costs would be related to adding additional modules or future upgrades. With cloud-based software, you bypass the need to purchase hardware. However, cloud-based software often involves a monthly or annual subscription. This may be a cost that’s associated with a single use for your company, or you may need to pay by the individual user license. The biggest difference here is fixed versus variable costs and your ability to predict them over time.

IT maintenance: Another difference between a self-hosted solution and a cloud-based solution is who provides technical support when something goes wrong. With a self-hosted solution, you need to have the human resources and expertise on hand to quickly address the situation if a server goes offline or a program malfunctions. With a subscription service, your software-as-a-service (SaaS) provider will provide any technical support needed throughout the life of the contract.

Updates: Software evolves over time, whether it’s adding new features or installing security patches. This must be factored into the cost of choosing a solution. With a cloud-based solution, the provider will simply update the software and roll it out to customers. Your only responsibility will be to learn any changes that might occur as a result. If you choose a self-hosted solution, you must factor in the IT time needed to manage updates and deal with any data lags or performance issues that emerge as a result.

Investing in customer experience technology has become an essential part of delivering a winning customer experience. One area companies may overlook is the costs associated with choosing one model versus another. By understanding where and when you’re likely to spend money with each type of solution, it is possible to choose an option that’s the best fit for your needs.