On-Site vs. Hosted/Cloud Applications: Functionality and Cost

January 23rd, 2013 / By Jill Devrick

Regardless of whether an application will be deployed on one of your servers or accessed across the internet in a hosted mode, you need to find out if the features the software offers will meet your needs.  Historically, deployed systems installed and managed within an organization have allowed for more flexibility and customization, but this isn’t necessarily the case anymore.  Although hosted solutions may be perceived as more “cookie cutter,” many of the up-and-coming hosted solutions have the same or nearly the same feature set as a deployed system.  For example, 3M’s ChartScript and ChartScript.com solutions have comparable feature sets, and they are becoming more similar with each release.  Take any system you are considering for a test drive to determine if it can accommodate your organization’s configuration preferences and workflow for all users, including dictators, transcriptionists, and administrators.

Another consideration is utilization.  If you are considering a hosted solution, find out how many other organizations and/or users will be using the system at any given time.  Ask about peak load capacity and utilization times, and also about scalability and how the vendor handles expansion of capacity over time as resource needs grow.  If the system is too sluggish for users to meet their productivity goals, then an elaborate feature set won’t help.

The same is true if you choose a deployed solution.  If you implement software on-site using your own hardware and IT resources, how quick, easy, or expensive would it be to add capacity as needed compared to a hosted solution?  If your organization already has a robust IT infrastructure and support system, deployed software makes sense.  But if you have concerns about utilization outpacing internal resources over time, investing in a hosted system may eliminate many IT challenges that your organization might face.

Then there is the important question of cost. Will the solution you’ve chosen fit your financial picture?

A traditional deployed system usually requires per user license fees, implementation fees, an enhancement and support contract, IT staff, and hardware infrastructure, so it involves a large capital investment in the short term, but less month-to-month costs.  Keep in mind, however, that with deployed systems, there will likely be future costs involved with upgrades, new data integrations, or system expansions.

On the other hand, hosted systems often have minimal or no setup fees, but the organization pays a fee at regular intervals, usually based upon monthly usage.  Accordingly, the hosted system avoids a large capital expense, but the cost becomes more operational, like paying rent or a utility bill each month.  Upgrades are typically included in the basic hosted fee structure, as are adding new accounts or facilities, because the cost would be reflected in the increased usage incurred from the expansion.  And many hosted solutions offer volume discounting, so as your usage increases, so does the value.

When evaluating the financial aspects of deployed vs. hosted systems, you should determine the amount of capital and existing IT resources you have available.  In addition, consider your cash flow to determine if the monthly expense for a hosted system is reasonable for your organization.  For a high-volume organization with good IT and capital available, ownership of a deployed system may be the most economical, but for an organization who wishes to reduce its capital expenditures or onsite IT footprint, incorporating usage fees into a monthly budget may be more cost-conscious.

In my next blog, I’ll address data security and accessibility issues to keep in mind when choosing your on-site or hosted/cloud solution.

Jill Devrick is a Product Solutions Advisor with 3M Health Information Systems.