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

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

On-Premise vs. Hosted—The risks to be aware of

You’ve probably heard the terms on-premise and hosted, but you may not know what each one is and how they differ from the other. Today we’re going to discuss these two types of software platforms so that you can make more informed decisions for any future technology purchasing decisions.  

What is on-premise software?

On-premise software
On-premise means that the software “is located within the physical confines of an enterprise.”

Let’s elaborate on this…

If you choose the on-premise solution, here are a few things you should consider:

  1. Cost. Most on-premise solutions require a heftier upfront cost and minimal yearly costs for things like maintenance, support, and updates.
  2. Accessibility. Unless the software has built-in file sharing or cloud-based components, the likelihood of accessing your data from remote locations is unlikely. On-premise software is made to be accessed and used in one single location.
  3. Management. The software is often managed by you or someone on your team. One common example of an on-premise software would be Excel Spreadsheets.
  4. Downtime. If your on-premise solution goes down, it could be quite a while before you can get back up and running. You'll either have to hire your own on-site IT person (which could be an additional $75,000 cost per year) to manage the software OR contract someone from your service provider. Either way, you'll have to pay for the downtime (employee time and revenue loss) and pay for the fix itself—so the issue can get costly quickly. 


On-premise software is more susceptible to ransomware. Ransomware is malicious software that invades your computer, finds your files and data, locks them, and holds them for ransom for hundreds to thousands of dollars. Unless you have vast IT knowledge, it can be near impossible for you stop once it happens. Not only would this cause mayhem in your office, but it would be a liability nightmare since you house the sensitive information of all of your clients.

And if you do choose the on-premise software route, then you must have a backup system implemented. Why is this important? Well, if you experience computer malfunctions or hardware failure, then you’re in the running to lose all of your data.

How can I backup my files?

There are two ways you can backup your files on-premise:

  1. Your own data servers
  2. File cabinets full of paper files
If you choose data servers

Data servers are a great way to backup and ensure the safety and security of your files, but there are some drawbacks:

  1. You have to purchase them. A server can run you from a couple hundred to many thousands of dollars depending on the quality and size you choose.
  2. You have to house them. Depending how many you have, servers can take up a lot of space. So you’ll either have to rearrange current space or purchase more space.
  3. You have to pay extra utilities. Servers are electrical current monsters that use a ton of electricity and can easily overheat. Wherever you do choose to store them, ensure that it has space to keep a constant fan blowing.


You should not skimp when it comes to buying a quality server. It will be holding all of your backed up data and is your last line of defense. Make sure you do your research and consider spending more to ensure the server you buy is quality.

If you choose paper files

If you choose paper files, then that means you have to provide a safe and secure location in which they can reside. This means making space in your current office or renting out a separate storage facility to house the paper documents. However, the best way to ensure their safety and security is by providing a space that is in a different quadrant and/or region than your main location. This helps ensure that your documents stay safe if a natural disaster strikes your area or someone breaks in.

Choosing this route provides two major problems: distance and cost.

You want to make sure your files stay up-to-date, and the best way to do that is by backing them up on a regular basis. But, to keep them updated, then you’ll have to get them to the distant location. You can do this by scanning them, faxing them, or emailing them to your other location—or you can drive the 20-hour round trip and update them manually.

Then, on top of that, you have to factor in the costs of renting the building, paying and training the employees, buying the printer/fax machine, and paying for any transportation costs associated with driving there. You can also opt for housing your files in-house, but if there’s a fire or a burglary, then you’ve essentially lost all of your data.  

What is hosted software?

Hosted software
“Hosted software refers to software that is installed, hosted and accessed entirely from a remote server or location.”

Let’s elaborate on this…

If you choose the hosted solution, here are few things you should consider:

  1. Cost. Most hosted software comes with monthly or yearly charges. There’s less of an upfront cost, but it will depend on the software. When switching make sure you ask about the import, setup, training, and any other additional fees that will come implementation.  
  2. Accessibility. Hosted software is cloud-based software. This means that you can access your data from any device in any location as long as there is an internet connection. So, you can basically work from anywhere.
  3. Management. Although the book-of-business is managed by you, the software itself is managed by the software provider, so you don’t ever have to deal with the technological headaches.
  4. Downtime. Cloud-based softwares rarely experience downtime because they are backed up by a variety of reliable servers. In fact, AgencyBloc has an uptime of 99.99%, so you never have to worry about trouble accessing your book-of-business. 

Usually, when you subscribe to a hosted platform, the software will be maintained and protected by the software company. One of the biggest perks of a hosted software is it is backed up on servers in various parts of the country. What this means is that if something happens in one quadrant of the US, your files are protected because they are stored in a number of secure locations. For example, AgencyBloc automatically backs up data onto multiple servers across the country every second, so you never have to worry or manually secure your files.

Backing your files up in the cloud also helps to better protect your files from a variety of disasters like electrical problems, malware, or hard drive crashes because the servers aren’t directly connected to your computer.

Leading insurers also are improving their profitability through integrated cloud computing solutions that cost less than on-premise technology.
EY 2015 Global Insurance Lookout

Why does this all matter?

Buying into a technology that is not only safe and secure but is easy to use, you can grow your business. You’ll be able to better protect your clients’ sensitive information by leveraging the security you can offer against your competition. This can help build the trust they have in you because they’ll understand that you’ve taken the necessary precautions to put their well being first. In addition, if anything unfortunate should befall your insurance agency, you’ll be able to keep serving your clients since hosted software do not need a stationary office.

Learn more about how AgencyBloc's software can better protect your data

AgencyBloc is a hosted agency management system that helps life and health insurance agencies grow their business. Schedule your personalized 1-on-1 demo and ask about how our software can help your insurance agency run more efficiently and enhance your security.

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Allison Babberl

By Allison Babberl on May 16, 2017 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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