What’s better: on-premise or cloud-based software?

At this year’s ITExpo East in Miami (a conference where RingCentral exhibited), an entire panel of industry experts attempted to make sense of that question. Even when their conversation concluded, however, much remained unresolved. Is there a single “best” choice? The simple answer is no – different companies will have different demands, requirements and budgets. There are, however, mitigating factors that make cloud options look pretty attractive.

Cost is one such factor. Cloud software is typically licensed to the end user, so it can be budgeted (and “accounted for”) as an operating expense. In addition, cloud apps require far fewer technical experts to manage than on-prem solutions.

Scalability is another factor to consider (especially for larger organizations). Cloud solutions can be spun up or down as needed: with a product like RingCentral, for example, new users can be added in just a few mouse clicks. That ease of management means increased productivity.

With benefits like these, it’s little wonder that Gartner is projecting that cloud computing and big data “will deliver transformational benefits to enterprises within two to five years, and by 2015 will enable enterprises… to outperform competitors by 20 percent in every available financial metric.” When a trusted analyst firm like Gartner is this bullish on the cloud, why would any company risk being left behind?

Cloud services are so compelling from an end-user standpoint that one almost feels bad for those selling on-prem products. Surely they’re feeling some pressure: their products simply can’t provide the seamless reduction in capital spending that comes with hosted models (nor the ability to add features with a simple click or call).

A workable analogy can be found in rubber pioneer Charles Goodyear. While he was the first to vulcanize rubber – effectively creating an industry now worth billions of dollars – he was too slow to react to the market’s demands. He ceded the rubber industry to other entrepreneurs – those who focused on offering products that the public wanted, and enjoyed great success as a result.

This is similar to the conundrum that many on-premise providers are facing. Cloud-based solutions provide a canvas for illustrating future strategy, with an article from Forbes driving this point home quite nicely. The piece poignantly emphasizes the real business benefits that cloud solutions provide.

One thing is for sure: the software industry is quickly speeding away from soup-to-nuts solutions in favor of cloud products (like hosted PBX services). When cloud services cost significantly less, consume no office space, and are future-ready, the decision to embrace the cloud is a bit of a lay-up. Regardless of company size, the migration towards a hosted model brings more cost efficiency – a welcome constant for the businesses that rely on them.