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Should You Buy Your Software or Rent It?

Lori Halley 20 November 2008 4 comments

Choosing software for your organization is a lot like choosing where to set up your office. What type of office space, how large, with what features, in what price range  — that all depends on the needs of your particular organization.  Basically, you have two choices: you can buy your own office building, however modest, or you can rent space in someone else’s building.

And it’s the same with software.

But which is the better choice for your organization — self-installed software or a hosted package?

hosted software checklist

Installed Software:

Remember when it was all so straightforward? Software came on a disk, packed up in a box with its user manual and warranty card. You purchased a product, installed the software on your own computer or server,  put the box away on a shelf, and hoped that you had made the right purchasing decision — that the software would perform reliably and as intended.

After a time, inevitably, that software would became obsolete or simply fail to meet your changing needs, and you’d have to decide where to put your  time and money next: to update the software or to replace it.

Now it’s far more common to download our software from the Internet. Those rows of software boxes and print manuals have all but vanished from most office shelves, and online software updates are often as quick and painless as clicking a button.

But software selection, installation, troubleshooting, and maintenance tasks are no less time-consuming than they ever were. And just as a building owner must pay the plumber if a pipe springs a leak, software owners have the responsibility to keep their own systems up and running, even if that means bringing in an expensive tech consultant at times.

Hosted Software:

Hosted software — you may also hear it called Software as a Service (SaS or SaaS) or Application Service Provider (ASP); the terms are often used interchangeably — lives on someone else’s server, along with the data associated with its users, who access the software through the Internet.

Some hosted software is free (in fact, there are a great many useful web-based applications that are free of charge, as we often discuss in the Wild Apricot blog)  but usually you’ll pay a monthly fee to the company that owns and hosts the software. The fees are most often scaled according to the size of your operation, number of users, amount of data to be stored, and so on.

Your “rent” generally entitles you to access the software over the internet, to store a certain amount of data on the host servers, and to expect some level of tech support from the vendor. The vendor’s responsibility, in turn, is to provide the service that you’ve contracted for, to manage and maintain the software and hardware required, and — in short — to take on the day-to-day headaches that come with the privilege of ownership.

So, how do you decide whether installed or hosted software is the right choice for you? In The Truth About Hosted Software, Idealware.org takes a look at the “fairly complicated set of considerations” involved in making that decision.

As always, it depends on your needs and situation. It rarely makes sense to dismiss the entire idea of hosted packages as inappropriate for your organization. Weigh user interfaces, security, features, customization and integration needs, and the amount of control your organization needs.

Idealware walks you through the core differences between installed and hosted software options, and the main points to weigh in the balance. “If your organization is small and without much technical support," the article concludes, “a hosted package may be a good fit — if it provides the functionality you need…. For a customized, mission-critical application for a large organization, the decision becomes more complicated.”

It might be useful to get out your spreadsheet software and list each of the points that Idealware.org covers, then note exactly how each software package you’re thinking about will measure up. There are bound to be trade-offs, of course, as no one solution is ever going to be perfect, but building a checklist like this should help to clarify which one — installed or hosted software — is likely to work best for your organization.

Lori Halley [Engaging Apricot] Lori Halley [Engaging Apricot]

Posted by Lori Halley [Engaging Apricot]

Published Thursday, 20 November 2008 at 4:04 PM


  • Mitchell Allen said:

    Thursday, 20 November 2008 at 9:04 AM

    As you have summarized, it's more a question of "How do I choose"?

    I would also add that, rather than being and either / or question,

    you may find yourself asking over and over for EACH class of software.

    Office Applications - if you are going to heavily customize your workflow, hosting should minimize the risk of disruptive continuity brought on by the high turnover rate of the volunteers who operate and maintain the store-bought software.

    Backup Software - Not an issue if your most important data is already in the "cloud". However, if you opt to buy most of your software, this is one area where you'll definitely use both hosted-backup and off-the-shelf backup solutions. That's simply due to the dynamics of archiving: what to backup, how often to do it, how large the backup sets are and how long to keep them.

    Email - even though you can easily obtain free email (Outlook, Thunderbird), you have two concerns with this software: data loss and privacy. Web-based email such as gMail, from Google, will mitigate the risk of data loss that you would face with a desktop application. But the privacy concerns ...

    Financial - to me, it's scary enough using TurboTax online. I'm not sure an organization will trust its financial records to web-based applications. If there is a hybrid solution, where your data is kept on your hard drive while the web-based application accesses it, an organization may consider "outsourcing" the ownership headaches. In this category, it may be worthwhile, since tax laws change often enough that ownership of potentially obsolete software becomes an annual source of angst.



  • Dmitriy Buterin [Chief Apricot] Dmitriy Buterin [Chief Apricot]

    Dmitriy Buterin [Chief Apricot] said:

    Saturday, 22 November 2008 at 3:52 PM

    Check out this post on ReadWriteWeb on the same subject - just came out:

    Is SaaS Cheaper Than Licensed Software?


  • Lori Halley [Engaging Apricot] Lori Halley [Engaging Apricot]

    Lori Halley [Engaging Apricot] said:

    Saturday, 22 November 2008 at 5:14 PM

    @Mitchell, I think you've got a good point, that it's useful for ann organization to look at the equation separately for each class of software, depending on its needs and priorities within that area.

    @Chief Apricot, thanks for sharing the ReadWriteWeb link: when you look at the math... it's thought-provoking. The comments on that article are especially interesting, as they bring up quite a range of issues and viewpoints - I hadn't even considered the "green" implications, for instance! And one commenter has echoed Mitchell's main point quite closely, I see: "Ultimately, each situation must stand on its own criteria." Well worth reading.

  • Samuel Dass said:

    Sunday, 15 February 2009 at 11:20 AM

    We found that some of the factors that affects people to decide buy vs. rent has also to do with the following:

    Size of the company: Normally companies with IT staff is more inclined to buy rather than rent.

    Security Consciousness: Companies that want to keep their data more secured is not inclined to keep it in somebody else's server.

    Some more points regarding these are in our blog at:


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