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What is the Difference Between Hosted Software and True Cloud Software?

What is the difference between Hosted Software and True Cloud software.jpg


The answer to this question could cover many pages, but I want to focus on the benefit of software that is written for the cloud to Field Service companies. Please understand that I may make certain generalizations for simplicity and brevity.


“There’s a disturbing trend reemerging in our client inquiries of late: rising demand for software-as-a-service (SaaS [True Cloud Based Software]) solutions and purchases of solutions that are not really SaaS. When we inform clients that the solution they’re talking about isn’t SaaS, we are increasingly hearing, “So what? As long as I don’t have to run it, it’s better.” This is a trap that can cost you more, result in less agility, and lock you into a poor sourcing decision.”

Forrester Research, March 2014


Much of the confusion is related to the liberal use of the word Cloud and the tendency for vendors to use the word Cloud to describe their Hosted software offerings (see definitions below). This blog will distinguish the two concepts by:

  • Defining them
  • Not using them interchangeably
  • Explaining the benefits of software written for the cloud

If the explanations given here are too rudimentary, I am not trying to insult your intelligence. I’m using my own experience of being frustrated by my inability to understand the terms. Once someone dumbed it down for me, I was able to grasp the differences and start to evaluate and explain the Return on Investment (ROI) associated with each (we’ll go into ROI in next week’s post).


Premise: Your software is always on a server somewhere; just because you got rid of your server and routers and switches etc. doesn’t mean the software has changed, it just means it resides on someone else’s server.



Client/Server Software

Client/server is a program relationship in which one program (the client) requests a service or resource from another program (the server). Much of the software written before 2000 is client/server based, to include Microsoft GP, SL, NAV and Intuit QuickBooks Enterprise.


On Premise Software

Client/server software that you load onto your in-house server and maintain yourself, or through a paid resource.


Hosted Software

Client/server software that resides on a server outside of your premises; the same software you would buy to put on your in-house server, you put on someone else’s server by “renting” space from the vendor. The installation, configuration, updates and customization are done in the exact same way as they would if it resided on your server. You would utilize a Remote Desktop server application to gain access to the remote server and your software.


You gain the advantages of no server, no backup worries, reduction/elimination of technical resources and anytime anywhere access. You retain many of the onerous aspects of Client/Server software.


True Cloud Based Software

The software is written for the cloud and is not client/server based. The software resides in a multi-tenant (many instances of the same software, each run separately for each company) environment on a remote server. All the advantages listed above, removal of server hardware and associated costs/headaches, while also including the advantages provided by software that is written for use in a cloud environment.  


Benefits of True Cloud Based Software

“The real benefit to the Vendor, as well as the Client, comes from the SaaS Business Architecture’s inbuilt Multi-Tenancy, which can be leveraged to help Improve Customer Service and Retention, Reduce Sales Cycles and Accelerate Revenue, Gain and Maintain Competitive Advantage, Improve Strategic Planning Abilities, and even Directly Monetize Beyond the Application.”

Lincoln Murphy, Writer and Speaker

SaaS and Enterprise Software Consultant


No Upgrades

True cloud based software in a multi-tenant environment allows the software publisher to have EVERYONE/EVERY COMPANY/EVERY USER to always be on the latest version of the software. A company doesn’t have to undertake a major event by the decision to upgrade to the latest version of the software: no downtime and no heavy expense. For instance, NetSuite does two major upgrades of its software per year for free, with no noticeable interruption to the user. 


Installation Costs and Time

On premise software or hosted software are both of the client/server variety so there are the costs associated with installation and configuration of the server to accept all the “idiosyncrasies” of the software application: port assignments/firewall/presence of other software that doesn’t “play well” with your software on the same server etc. If the vendor is providing these services, then the vendor will find a way to pass along this cost to you. (For help calculating the total cost of ownership (TCO) for any software, see our blog post on TCO).


On the other hand, by utilizing True Cloud Based Software, the service’s core functions are implemented in a uniform fashion for all customers.


Addition and Utilization of New Features

You get the “newest and greatest” (their words, not mine) features free of charge and free of installation time. Everyone is always on the latest version of the software and consequently has access to all of the latest innovations. Because all customers are running on the current version of the application, the True Cloud Based software vendor can deliver new features and capabilities as fast as it can produce them.



Most systems, beyond the entry level, provide for and require some type of customization because your business simply can’t fit into a narrow application window. Customization on a True Cloud Based Software platform is typically faster and cheaper than its client server counterpart. I won’t bore you with the details, but you are welcome to make inquiries to vendors on their opinion; just make sure you get more than one take on the situation. A vendor selling only client/server software may provide a decidedly different answer than a vendor who does both.


Ecosystem Superiority

A popular software application or platform (Microsoft, NetSuite, Oracle, Salesforce) attracts vendors, such as us at Sentrien, who extend the features and functionality of the existing software through customization. This is called an ecosystem. The client/server based ecosystem is producing new features that only work on a certain version of the software and as that version antiquates, the vendor may or may not rewrite their customization to run on any of the other versions (one of the pitfalls of version lock).


True Cloud Based software has an ecosystem of vendors that are always using the latest version of the software to add their innovations. You benefit from this by always having not only the latest version of software, but the latest vendor innovation choices.



With the advent of incredibly efficient and fast internet connections, advanced server software and low cost of storage, moving all your software out of your facility onto a hosted or cloud environment has never looked better.


Next: Return on Investment (ROI) for Hosted vs. True Cloud software 


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