Understanding SaaS vs Self-hosted: What are the Differences and Benefits of Each?

The journey from computers to cloud computing is a fascinating tale of technological evolution marked by two distinct trends. Firstly, the hardware-centric approach gradually shifted towards standardized software. Secondly, from a user’s perspective, the story moved from the ‘own’ to the ‘serve’ model. SaaS emerged from this shift, expediting the adoption of software applications like never before.

Today, SaaS is the most preferred option for deploying any software application. The global SaaS market grew to $197 billion in 2023, with Adobe leading the pack. SaaS offers the best of both worlds in terms of delivering and using software, offering a cost-effective, efficient, and reliable option.

What is SaaS?

SaaS, or Software-as-a-Service, is a software application readily accessible over the Internet without user installation via physical media (such as CDs and DVDs) or downloaded setup files.

SaaS is hosted by an external vendor as a cloud computing service that executes the backend for the user. The user interface, otherwise considered the front end of the software, is accessed via the web browser or an accompanying app. Therefore, SaaS leverages the computing power of a cloud server and the speed of broadband Internet connections to deliver instant, real-time functionality.

Generally, a SaaS model resembles the following shared responsibility model:

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What are the benefits of SaaS?

Subscription-based pricing

Rather than charging for a license to download and install the software locally on your personal computer, SaaS offers subscription pricing so you can access the software anytime. Instead of paying a hefty, one-time price to own the software, you pay a small fee to use the hosted software on a recurrent basis.

Centrally hosted software

SaaS software is centrally installed and hosted. This hosting is supported by an underlying cloud computing infrastructure consisting of servers, databases, and other components. One hosted instance of SaaS can serve many users, unlike a license purchase (where one copy of software is owned by a single user or can only be installed on a single computer).

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Flexible in configuration

SaaS typically allows you to choose between different subscription tiers on the fly. Additionally, SaaS can roll out new features and upgrades to users with an instant refresh instead of requiring periodic maintenance and upgrades.

What are the cons of SaaS?

Security and privacy concerns

A user interacting with a SaaS application exchanges a lot of data that is stored and processed by the SaaS provider within its cloud infrastructure. Some of this data also contains users’ personal information. As a result, there is always a possibility of data breach or loss of confidential information if the SaaS provider does not take adequate precautions.

Dependency on the Internet

As SaaS is accessible over the Internet, it poses a challenge in mobile environments with limited or no Internet access. Even if the SaaS application can work offline, its functionality is constrained to support only certain basic operations.

Cost escalation and sprawl

SaaS is cost-effective, but some vendors charge more for high usage. In addition to that, using too many SaaS tools for individual tasks results in application sprawl with unnecessary context switching and a disjoined user experience.

What is self-hosted SaaS?

Self-hosted SaaS refers to a particular type of SaaS hosting model. In general, the hosting responsibilities of a SaaS application lie with a third-party provider. Most commonly, this is the SaaS provider or the SaaS development company that develops, hosts, and maintains the application. However, in the case of self-hosted SaaS, a company purchases the license from the SaaS development company and is responsible for hosting the SaaS application on its own servers.

Self-hosted SaaS serves the end users and stakeholders of the company and is not accessible to anyone over the public Internet. The responsibility for managing the underlying cloud infrastructure and ensuring security, maintenance, and upgrades for the SaaS software also falls directly on the shoulders of the company.

What are the benefits of self-hosted SaaS?

Enhanced security and privacy

Since a self-hosted SaaS application is deployed on an owned infrastructure, the data and sensitive information are never shared with the SaaS provider. This feature enables data security and facilitates self-regulated compliance (e.g., through processes like SaaS Security Posture Management) to ensure total control over data ownership.

Deployment flexibility

Self-hosted SaaS offers a lot of flexibility in deployment-related decision-making, such as performing upgrades, enabling features, or altering the infrastructure capacity of the SaaS application, which otherwise would have been under the control of the SaaS provider.

Integration with internal systems

A self-hosted SaaS offers better integration with other internal tools and applications, achieving a seamless workflow for users instead of switching between multiple applications or performing manual tasks that hinder overall workflow efficiency.

What are the cons of self-hosted SaaS?

Upfront cost

A self-hosted SaaS application entails a high upfront cost due to the license purchase for self-hosting of the software. There are also infrastructure costs associated with it.

Maintenance overheads

In a self-hosted SaaS deployment, your company is responsible for maintaining the infrastructure, applying patches and updates, and ensuring system security. This type of ownership causes additional overheads in terms of time and costs. For example, hiring additional staff to monitor the hosting infrastructure, purchasing other IT resources to guarantee hosting uptime, and updating business processes for regulatory compliance.

Limited scalability and customization

Scaling a self-hosted SaaS is challenging if the company needs to accommodate more users from different geographies through a multi-region architecture. It leads to additional complexities and requires specialized knowledge and expertise in cloud server administration and deployment. Similarly, customization of hosted SaaS is limited due to the lack of development support to tweak the software source code.

Key differences between SaaS and self-hosted?

Technically, both SaaS and self-hosted are the same, but the key difference lies in ownership of hosting, commercial considerations, and business compliances. Here are some other big differences:

1. Pricing model

SaaS follows a subscription-based pricing model that charges every user a periodic subscription fee. It is most suitable for early-stage startups and small companies. Self-hosted SaaS involves a license cost for purchasing and setting up a self-managed hosting infrastructure where users from a medium or large-sized company have unlimited access to the SaaS application.

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2. Support options

The SaaS provider is responsible for supporting users regarding application issues, software bugs, and hosting-related issues. In self-hosted, the responsibility lies with the company that purchases the license and is limited to hosting support only. In most cases of self-hosted, the company buys an additional support plan from the SaaS provider to provide development and customization-related support at the application level.

3. Scalability requirements

SaaS offers scalable hosting, allowing many users to access the application simultaneously. It instantly manages the surge in user activities since the hosting infrastructure is tuned to handle many concurrent users. However, scalability in self-hosted is limited, and expanding the user base requires additional investment in cloud infrastructure beyond initial migration, which you’ll have to plan with a long-term projection.

4. Vendor lock-in considerations

Choosing to host using a SaaS vendor results in migration over to a software solution where users are typically locked-in. Self-hosted allows a company to host the SaaS application on their servers, own the data, and build additional abstraction layers, which can plugin multiple SaaS applications via APIs.

5. Security compliances

In the case of SaaS, the security and privacy compliances are the responsibility of the SaaS provider. For example, adhering to data protection regulations in line with GDPR, SAST testing to detect applications’ source code vulnerabilities, and implementing user access control methods like MFA. However, these requirements fall under your company’s purview in the case of self-hosted SaaS. If the company relies on a third-party cloud infrastructure, then your company is also responsible for conducting additional audits to maintain regulatory compliance.

This can often be a complex undertaking, with many best practices to consider such as:

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SaaS vs self-hosted: Is it a trade-off between cost and data sovereignty?

On the one hand, SaaS eliminates the barriers to software usage through affordable subscription fees. The downside of this virtue is the loss of control over data and the lack of data sovereignty, which can become a business risk as your company grows and its products and services become increasingly competitive.

However, setting up a self-hosted SaaS can be incredibly frustrating due to the hidden overheads of managing the infrastructure.

Attempting to attain the benefits of SaaS with flexible hosting options while maintaining full control over your software? Control Plane’s platform leverages cloud-native architecture to operate client infrastructure with minimized overheads and built-in security and compliance functionality. With auto scale and Control Plane’s Capacity AI™ built-in feature, you can slash your cloud compute costs by 60-80%.

Control Plane both manages your workloads and provides an Internal Developer Platform (IDP) that helps you start in minutes and rapidly move SaaS applications to a production-grade, self-hosted SaaS environment with a streamlined and intuitive developer experience.
Thinking about trying the Control Plane platform? Request a demo today.