On-Premise Software vs. Hosted Software: What You Need to Know

On-Premise Software vs. Hosted Software: What You Need to Know

Learn the differences between on-premise and hosted software and how the right insurance agency management system can help you stay secure.

When it comes to software platforms, you’ve probably heard the terms on-premise and hosted–however, you may not fully know what they mean. 

Learning what they are, along with their strengths, differences, and vulnerabilities can help you make better-informed decisions that protect your agency–and your client's sensitive data. 

What is hosted software?

Hosted software is accessed on a remote server or location. Your data lives outside of your physical office and is managed by your software vendor. Cloud-based data centers, like Amazon Web Services (AWS) and Microsoft Azure, and data stored off-premise on a physical servers are examples of hosted software. 

If you choose a hosted software solution, here are a few things to consider:

1. Cost. Most hosted software comes with monthly or yearly charges. They usually cost less upfront, but this depends on the software. When switching, ask about import, setup, training, and any other fees that come with implementation. 

2. Security. Hosted software is offsite and continually backed up. Should a natural disaster, power outage, malware, hard drive crash, or theft happen, your data will be protected–enabling you to serve your clients without missing a beat. Cloud-hosted software has support from a built-in team of security experts that monitor their database infrastructure for attacks. These platforms also encrypt your data, preventing hackers from doing anything with it should a breach occur.

3. Accessibility. Hosted software is cloud-based. This means that you can access your data from any device, anywhere, anytime as long as you have internet access–so, you can basically work from anywhere.

4. Management. Although you manage your book of business, the software itself is managed by the hosting provider, so you won’t have to deal with the technological headaches of software management.

5. Downtime. Cloud-based software solutions rarely experience downtime because they are backed up by a variety of reliable servers. In fact, AgencyBloc, a secure agency management system designed for life and health insurance agencies, has an uptime of 99.99%, so you never have to worry about being able to access your book of business. 

Usually, when you subscribe to a hosted platform, the software will be maintained and protected by the software vendor. One of the biggest perks of hosted software is that it’s backed up on servers in various parts of the country. This means if something happens in one quadrant of the U.S., your files are protected because they’re stored in a number of secure locations.

At AgencyBloc, we automatically back up data onto multiple servers across the country every second, so you don’t have to worry about manually securing your files.

What is on-premise software?

As implied by its name, on-premise software is software that’s installed and located within the physical confines of an organization or on the computer of the person using it. One common example of on-premise software is Excel Spreadsheets.

If you choose on-premise software, you want to consider these factors:

  1. Cost. Most on-premise solutions have a heftier upfront cost and minimal yearly costs for things like maintenance, support, and updates.
  2. Security. Many people think that onsite software gives them more security. However, keeping your client’s sensitive data secure with on-premise software requires certain tools, a high level of IT knowledge, and consistent upkeep to avoid breaches.

On-premise software is also more susceptible to ransomware, which is malicious software that invades your computer and holds your data for ransom. 

Unless you have in-depth security knowledge, it can be nearly impossible to stop once it happens, causing mayhem in your office–not to mention, a liability nightmare.

3. Accessibility. Unless your on-premise software has built-in file sharing or cloud-based components, it’s unlikely you’ll be able to access your data from remote locations. On-premise software is made to be accessed and used in one location. 

4. Management. On-premise software is typically managed by you or someone on your team, like an in-house IT expert, which can cost a healthy salary.  

5. Downtime. If your on-premise solution fails, it could be a while before you can get it running again. You'll either have to hire an on-site IT person to manage the software or contract someone from your software vendor. Either way, you'll have to pay for the downtime (employee time and revenue loss) and pay to fix it—so downtime can get costly quickly. 

On-Premise Software Requires You To Create Your Own Data Backups

If you choose on-premise software, you need a backup system in case there are computer malfunctions or hardware failures, which could cause you to lose all of your data. These backups can be made on your own data servers or in file cabinets, with paper files.

Data servers help keep your files safe and secure, but there are some drawbacks:

  • You have to purchase them. A server can cost a couple hundred to thousands of dollars depending on its quality and size.
  • You have to house them. Servers can take up a lot of space. You may need to rearrange your current office or purchase more space.
  • You have to pay extra utilities. Servers are energy vampires and can easily overheat. Wherever you do choose to store them, ensure that it has enough space to keep a constant fan blowing.

If you choose paper files, you need a safe, secure location to store them–either in your current office or in a separate facility. The best way to keep them secure is to store them offsite, at least 600 miles away from your headquarters. This helps ensure that your documents stay safe if a natural disaster strikes or someone breaks in. 

Paper backups aren’t the best option in terms of cost or efficiency. Since they’re so far away, backing them up on a regular basis becomes a hassle–even with scanning, faxing, or emailing. And with costs in payments for space rental, employees, printer/fax equipment, and transportation, this method quickly becomes pricey. 

Should you choose on-premise or hosted software for your insurance agency?

While on-premise software may be a good fit for some organizations, it’s clear that hosted software can be beneficial to agencies–it gives you the means to aptly protect your client's sensitive information without the headache of managing your own security. 

SOC II compliance (while not legally required) can also help you get a leg up on your competition. These standards, established by the American Institute of Certified Public Accountants, are made specifically for cloud-based software and can help you show your clients the high level of security you use when handling their data.

Pro Tip: Select a software vendor that is SOC II compliant. In doing so, you’ll know your agency’s data is safe with a company who has gone through a thorough audit of their security processes and controls.

Choosing an AMS software that’s safe, secure, and easy to use can help you grow and scale your business. With top-of-the-line security features, the convenience of cloud hosting, and built-in tools designed to streamline your agency’s processes (like data analysis), AgencyBloc gives you what you need to manage your data well. Plus, we maintain a SOC II Type 2 report because top-notch security for our clients is a top priority. 

Plus, our data migration capabilities can help you easily make the switch!

Need Help Vetting Hosted Software Vendors?

As you work through choosing a hosted software vendor, you want to ask the right questions to choose the best fit. Not sure where to start? Our security questions checklist can help!

Download the Checklist

This blog was originally published on May 16, 2017, and updated on November 8, 2022.

Allison Babberl

By Allison Babberl on November 8, 2022 in Technology

Allison is the Marketing Content Specialist at AgencyBloc. She creates educational content and designs videos to promote AgencyBloc's resources to help you organize, automate, and grow your insurance agency. Favorite quote: “Conversation is the bedrock of relationships. Without it, our relationships are devoid of substance.” -Maribeth Kuzmeski  More articles

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