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Rent or Purchase Business Software?

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Rent or Purchase Business Software?

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When it comes to choosing software for an organization, a business owner has to decide between installed or hosted software.

Both models work well, so the decision has to be based on considering as well as comparing remote access, user interface, licensing requirements, configuration, customization, risk management, infrastructure, and, of course, privacy and security.

Installed Software

This is the old school way. It still works, but has built-in limits. This software can come on a disk or it can be downloaded from the Internet. It requires installation and some basic technical skills to configure correctly. While technical manuals do come with it, they can be difficult to follow for someone who finds technology challenging.

The software might work as advertised or it might have unreported bugs. It might work for a while before it needs to be replaced with a more updated version. Occasionally, it might need troubleshooting when it freezes up.

If the software is fairly sophisticated, initial costs may be high.

Hosted Software

Hosted software, also called Software as Service or simply SaaS, is software hosted on a server owned by someone else. This software is rented. 

When it comes to high-end software, this software cuts operating costs because it allows a company to earn more from the software than it pays in rental fees. 

Today, any company can access high-end software for a low rental fee to run any aspect of their business. For instance, Microsoft Online Services rents out a suite of tools that will allow a business to perform any administrative or marketing function it needs to seamlessly run its business.

Rentals are based on a subscription model. Online subscribers access the Internet cloud, where they can access, use, and store information. It’s similar to a large corporation using an extensive private data center.

Comparison and Contrast

Here are four factors to consider between installed software and hosted software:

1. The more robust the software, the higher the price.

Buying high-end software may be outside a company’s budget, especially if it is a small start-up. Yet, for a reasonable fee, any company can access the software it needs to create profitable returns. In most cases, subscription renewal is an easy decision because the profits arising from the use of the software far exceed the cost of renting the software.

2. Dealing with technical issues.

A small company that does not have I.T. staff, but still needs to optimize its business by using technology may have problems after purchasing installed software. Conversely, renting software overcomes issues like glitches, maintenance, or upgrades.

3. Deciding on how many licenses to purchase. 

When purchasing software, a company often has to buy a number of licenses, one for each user group. But if the business is seasonal, a company may be stuck with either too few or too many licenses as the number of employees hired by the business either goes up or down. Since software is usually rented on a monthly basis, the number of licenses needed can be adjusted.

4. Ease of collaboration.

When renting software, users can easily access the software from the cloud and share ideas, pool resources and interpret the data. This makes collaboration effortless. Conversely, for this level of collaboration in a small company, a small business network has to be in place.

Which is a Better?

When a company buys business software, it loses out on some of the benefits of renting it like easier staff access, better cash flow, and no technical issues. Alternatively, if the software is relatively inexpensive to buy, then it can be an unnecessary expense to pay a monthly fee on it. So, ultimately, deciding on whether to buy or rent software actually depends on the type of software in question and how it will be used. 

Here is a good rule of thumb to help decide:

Buy software that has a low-ticket price, offers straightforward functions, and that does not require much technical skill to install, configure, maintain, or troubleshoot. For instance, it is better to buy basic office suite software than rent one.

Rent software that has a high-ticket price, offers sophisticated functionality, and that will not be a nightmare to install, configure, and hire tech support to troubleshoot, maintain or upgrade. For instance, it is better to rent human resource software because these have sophisticated features.

These tips were brought to you by George Hayes of Your IT Department, offering professional IT Support in the UK.


Opinions expressed by DZone contributors are their own.

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