Cloud-based or On-Premise CLM solution: Which Path Should You Take?

Is your company on the market for a reliable CLM solution?

If so, you’re looking for data security, system reliability, affordability, and as simple implementation as possible. You also need to be able to meet both your company and any industry regulatory requirements for security protocols. The question is, what type of CLM should you choose to give you those traits?

You’ll find you have options between on-premise or cloud-based CLM solutions. In this article, we’re breaking down the differences between these options, along with the relative pros and cons. 

Let’s dive deep into:

  1. Cloud-based vs. on-premise CLM solutions
  2. Advantages and disadvantages of cloud-based vs. on-premise CLM solutions
  3. Which CLM solution should you choose?

Cloud-based vs. on-premise CLM solutions

To begin with, here are the key differences between cloud-based and on-premise CLM solutions. You’ll notice there are two different types of cloud-based solutions, either single-tenanted or multi-tenanted:

On-premise CLM solutions

On-premise means that you as a company host the CLM software on servers that you own and maintain. For some companies, security policies or the large size of the company mean that owned servers are required or preferred. This is especially the case for those who work in highly regulated industries, such as within the financial sector.

Having the CLM on-premise means that your company must buy a license or copy of the software to install and use on your servers. It’s generally seen as a more security-conscious option as the company's IT department follows its own security protocols for managing and maintaining the servers. However, with that said, cloud-based options can still be very reliable in terms of providing a secure environment.

Single-tenant, cloud-based CLM solutions

Single-tenant CLM software is hosted on the cloud, but serves a single customer on a single server. Single-tenant customers each have their own database and instance of the software. However, the server is managed by the software company, meaning they conduct maintenance and updates.

Single-tenant solutions may be an alternative that is acceptable to some companies within highly regulated sectors, as long as they meet the security standards. With no data intermingling, they’re also seen as a very secure option.

Multi-tenant, cloud-based CLM solutions

Multi-tenant CLM solutions are where a single instance of the software and its supporting infrastructure serves multiple customers. It means each customer shares the application database on a server that is cloud-based. However, this doesn’t mean you see data related to other users - each tenant’s data is kept isolated and invisible to other tenants. You could liken it to renting an apartment in a multi-tenant building - you share the main structure but your own part of it is kept private for your use.

Multi-tenant solutions are managed entirely by the CLM company in terms of updates and maintenance. The broader access of a shared application database means that it may not meet the stringent requirements for those in highly regulated sectors.

Advantages and disadvantages of cloud-based vs. on-premise CLM solutions

Let’s break down the relative advantages and disadvantages for each type of CLM solution:

On-premise CLM solutions - The advantages

One of the major advantages of on-premise CLM solutions is largely for companies in highly-regulated sectors. You may not have a lot of choices about the solution you can take up because regulation may dictate that you must have your own, in-house server. If a CLM is available under those conditions, then it should be on your list to look into. In fact, availability on-premise would be one of your first questions about the software. 

Another potential advantage that is related to this is that you have total control over your data, hardware, and software platforms. Factors such as configuration and system changes are all up to you. (Note: this can also be seen as a disadvantage in companies that have little time for the management side!).

Lastly, there is a potential advantage in the overall uptime of the software as an internet connection is not required. It lives on your own internal server, meaning external factors such as internet outages don’t impact your use of the CLM solution.

On-premise CLM solutions - The disadvantages

There are some significant disadvantages to on-premise CLM solutions. First of all, they are much more expensive to implement than a cloud-based solution. They require large, upfront expenditure to set up, then ongoing costs in terms of maintenance. You must have internal IT expertise to manage and support the on-premise solution, which is another expense.

The maintenance itself can be another disadvantage. While cloud-based solutions roll out needed updates or new features automatically, an on-premise solution requires IT to do the work to make the updates. In some companies, this might take some time to implement, especially if IT is backed up with requests. An alternative might be to pay another IT expert, perhaps from the CLM software company, to make updates. However, that’s another expense.

Implementation is another factor that can put on-premise solutions at a disadvantage. In order to set up the CLM, certain conditions or requirements must be met within your internal infrastructure. Sometimes, companies don’t have those specifications already and need to spend time and money putting them in place before the CLM can be set up. 

We’ve seen this ourselves, where a rollout has taken six months or more because the client needed infrastructure set up first. In the end, this means the company misses out on six months of the streamlining that a good CLM solution brings. 

Single-tenant solutions - The advantages

Much like on-premise solutions, one of the primary advantages of single-tenant solutions is for companies that are required to keep their data separate from others. A single-tenant solution can provide that, with the added advantages of cloud computing.

For example, the CLM provider manages the server and can automatically make updates to the software. You don’t necessarily need anyone in IT dedicated to managing your CLM or taking care of maintenance.

Additionally, with an entire hosting environment dedicated to just one company, resources are abundant and you can expect a high level of reliability. There is also the possibility of customization options on single-tenant solutions because the whole environment is just for your company. 

Single-tenant solutions - The disadvantages

Once again, one of the drawbacks is cost. Single-tenant devotes more resources to a single client, so is priced at a premium. However, if you’re in a sector where you’re required to keep your database separated, a single-tenant solution will usually be cheaper than an on-premise solution.

In some cases, single-tenant will also require more maintenance to keep it running smoothly. Setup and implementation are also typically slower than you get in a multi-tenant environment.

Multi-tenant solutions - The advantages

One of the leading advantages of multi-tenant solutions is the cost. If you’re implementing a new CLM solution, multi-tenant is the least-cost option. The cost of the environment is shared between all of the tenants and savings are generally passed on in the cost of the software.

Multi-tenant solutions are also the lowest maintenance option for companies. The software provider owns the server and performs all database maintenance. They push through updates and new features for you.

Another advantage can be the ability to have integrations with your CLM solution. You’ve probably got other software solutions for which integrations help to create a frictionless experience. Need reminders sent out on Slack? Integration with your CLM could do this automatically.

As for implementation, in-general, multi-tenanted solutions can be rolled out in a matter of hours. You can sign up in the morning and have your first users learn the new system by lunchtime. 

Multi-tenant solutions - The disadvantages

In a multi-tenanted environment, custom changes aren’t usually an option. Integrations may make up for this, but in some highly-specialized companies, they may require more in terms of a custom solution.

Occasionally, you might find that you have downtime with the CLM solution, especially if there is an internet outage or issue with a server. In most cases though, this is rare. The software providers work diligently to ensure maximum uptime.

Lastly, one of the perceived disadvantages is security. Multiple users are on the same database, which may reduce control over security. We’d like to add though, that this doesn’t have to be the case.

It’s possible for multi-tenant solution providers to take measures that boost overall security, so we suggest that you look for solutions that do this. For example, here at SpotDraft, we run VAPT testing (vulnerability assessment penetration testing) every quarter. This means that we hire an external agency to look for any potential vulnerabilities in SpotDraft, and if they happen to find anything, we fix it immediately. This is on top of our regular security protocols where we make updates as necessary.

Which CLM solution should you choose?

This comparison should help you to weigh up the best type of solution for your company based upon your priorities or even regulatory requirements. There are relative pros and cons for each and it’s important to understand the differences.

If you absolutely must maintain a separate database, then an on-premise or single-tenant cloud-based solution is where you need to start. However, for most companies, a multi-tenant solution will be the best “bang for your buck” in terms of cost, ongoing maintenance requirements, and speed of implementation.

The bottom line is to look for a solution that has solid security protocols in place, including ISO compliance, SOC2 compliance, and regular VAPT testing. SpotDraft offers all of those things, as well as solutions for on-premise, single-tenant or multi-tenant preferences. Request your free demo here today.