The Difference between SaaS, The Cloud, and On-Premise Solutions

What do terminal operators need to know about SaaS, The Cloud, and On-Premise Solutions? Read our blog that discusses which works best at port terminals.
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SaaS, The Cloud, and On-Premise Solutions: What Terminal Operators Need to Know

Too often we find software providers touting their cloud capabilities. At conferences you can’t go more than 20 yards without someone mentioning “the cloud”. And time and time again, everyone seems to simply nod their head in agreement - without fully understanding what the term really means.

In the world of Terminal Operating Systems (TOS), the term “cloud” is especially prevalent and often abused. It is a core piece of the product infrastructure and represents how the system is hosted, implemented, and serviced.

It can get a bit confusing, so let’s break down some important terminology first.

Defining the Cloud

The Cloud: The cloud encompasses the information delivery and communication model where a large hosting company (ex. Google Cloud) maintains its own servers which stores the information you’re attempting to access (ex. Gmail).

The difference between their server and the on-premise server, is that these large companies have designed their server facility and hardware in a scalable and efficient way. Instead of having one server, they have millions. They’ve taken into account physical and digital security and the general needs of a variety of industries and businesses just like yours.

More technically, the cloud refers to data centers full of servers that are all connected to the Internet. Cloud providers (like Amazon, Google, or Microsoft) have millions of servers across the globe and lease the hardware to companies to use as their own hardware infrastructure. These servers replace the typical large, up-front IT purchases and overhead that a normal business would incur setting up their own server.

“Amazon Web Services is likely to have 1.3 million servers that are more than three times more efficient than enterprise systems, data centers that use space better and generate better returns of about 20 percent.”* -ZDNet

Cloud computing: Cloud computing can be thought of as leveraging the data centers and machines that these companies have housed inside their large facilities. Cloud computing can be storing, managing, or processing private data all using one of these remote servers.

Cloud providers in turn bundle the management of the facility, security, support, and the servers and sell it as a product to private enterprises. The clients of these companies can be any sort of business, including a terminal. It is especially attractive to businesses now more than ever because the cloud licensing fee represents a more nominal cost than what the terminal otherwise would have had to spend to set up the same capabilities in a local server.

A simplified example to help understand the difference would be in renting vs buying an apartment. An individual interested in purchasing a building must invest significantly more in due diligence to ensure that the building is in good standing, go through the permitting process, and obtain a license to utilize the property. Whereas in the case of a renter, he or she can bypass much of this diligence and simply pay a monthly fee for a finite period of time and then choose to move should the property not meet his or her expectations.

The average business is already using on average 1,427 cloud services. Examples of enterprises and applications that are leveraging cloud computing include: Netflix, Adobe Creative Cloud, Wordpress, Twitter, Facebook, Octopi TOS, etc.

There are different types of clouds: public, private, and hybrid.

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Public Cloud: The majority of cloud providers are able to achieve economies of scale and deliver rock bottom prices through the use of public cloud infrastructure. A public cloud is when a service provider licenses out its services to multiple organizations seeking the same offering. This allows the company to maintain a minimal cost and use the minimal amount of its resources. These cost savings are then passed onto the customer resulting in the lowest possible cost.

The cloud provider’s services are in turn easy to setup and use because there’s a “cookie cutter” type offering that’s shared between multiple organizations.

An analogous comparison would be in real estate. We can think about the public cloud as a regular condominium building with multiple apartment owners.

Private Cloud: A private cloud is dedicated to one organization. Whereas public clouds serve multiple companies, private clouds offer services and infrastructure on a private network. These setups are usually on a company intranet or hosted remotely at a server farm but on a machine that’s solely dedicated to your organization. A private cloud offers a high level of security and control and therefore comes with a much higher price tag.

In the same real estate scenario, we can look at the private cloud as a commercial building rented by a sole tenant but managed by a holding company. It’s undoubtedly more expensive, but where the renter may require more space or better facility control this would be the ideal scenario.

Hybrid Cloud: A hybrid cloud uses aspects of both a public and private cloud. A hybrid cloud allows organizational functions to move between the public and private clouds, as needs change in the company. This is a very flexible option for organizations where there’s serious concern around data and for back-up or failover situations.

The business cases that warrant this setup are usually found in businesses where customer data is extremely sensitive (i.e. banking). The real innovation around server infrastructure is happening at the public level. Since 2008, Amazon Web Services have launched over 1,000 new features and have dropped their price 50+ times.

“What are you doing that both demands agility and flexibility and the ability to self-provision and run programmatic infrastructure? [Where] you need agility and new technology, but not so much new technology that you can deal with the fact that private cloud, technology-wise, is vastly inferior to the features and the capabilities available to public cloud."
-Lydia Leung, Distinguished Analyst at Gartner

Now that we have a more firm understanding of what the cloud is and can do, let’s apply this to the Terminal Operating System. TOS vendors may claim to use the cloud, but that does not mean that they are providing you a true Software-as-a-Service (“SaaS”) product.

It’s an important distinction and terminal management ought to know what SaaS is and isn’t.

Definition of Software-as-a-Service (SaaS)

Software-as-a-Service (SaaS) is a type of cloud computing. This diagram helps organize the difference:

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SaaS “is a software licensing and delivery model in which software is licensed on a subscription basis and is centrally hosted.” It’s commonly referred to as the “on-demand” application and usually comes in the form of web applications that can be accessed from anywhere where there’s an internet connection and on any device.

The biggest difference between cloud computing and SaaS is that SaaS is a turnkey solution - meaning that the vendor assumes almost all of the application management, hardware infrastructure, and financial overhead on behalf of the terminal (but we’ll get more into that later).

In the world of terminal operating systems, this frees up capital at the terminal level and allows terminal management to do what they do best - to run terminal operations.

Similarities of SaaS and Cloud Solutions

Let’s get into how these two are similar as there are many overlapping qualities and features.

Opposed to on-premise solutions, which tends to be the costly software that runs on the premises (or at the port terminal in this case) rather than on a server located at a remote facility. The public cloud and SaaS are major money savers and allow terminals to better leverage and remain relevant when it rapid advances in technology.

Cloud and SaaS solutions also don’t require the same strenuous and time consuming installations or maintenance. Any updates, fixes, or patches can be quickly deployed with minimal amount of time pulling terminal staff away from their existing roles.

These solutions also prove superior in scenarios where software has been compromised and patches need to be deployed immediately. It’s far more difficult with an on-premise solutions because the provider has to notify the terminal, communicate back and forth, and explain how to fix or patch the vulnerability, and then work with the terminal IT staff to fix it. That’s a lot of work compared to cloud and SaaS solutions where the provider can instantly deploy a fix from one location.

Timing is of utmost importance in these scenarios and TOS systems are not immune. Remedying a basic common attack, such as an SQL injection, is far more complicated with an on-premise client base vs. a cloud based one.

Last, these types of solutions can also be accessed from anywhere, which can be a great convenience to terminal leadership. The architecture of these modern solutions also allow you to access your real-time TEU throughput at a conference or in a meeting by simply pulling out your phone and logging in.

Both offer many benefits, but what’s really important is to understand the differences.

The Differences between SaaS, Cloud, and On-Premise Solutions

It’s vital that your port terminal and its executives understand what type of service a potential TOS provider offers. The cost, security, and maintenance are drastically different between the choices.

What we see often from the incumbent market leaders is an on-premise server or hybrid cloud combination. We cannot recommend either of those options.

On-premise server + hybrid cloud means:

    - The client (or port) unfairly incurs a large portion of costs and must outlay those expenses before the software is even working.
    - An often complex setup and implementation process, requiring specialized IT personnel (long and costly implementation times)
    - Increased digital risk exposure as it will take longer periods of time before an update, fix, or security patch can be expected (more time and more cost to the terminal)
    - The on-premise servers are exposed to more physical risk than cloud solutions (a natural disaster, accidental fire or power surge, and/or an angry employee)
    - Investing in data rooms, hardware, and auxiliary equipment that is technologically relevant for only a short period of time.


Last, and perhaps even most importantly, terminals ought to be wary of market forces at play for the larger players. It’s often in the interest of the provider to tack on “added-value” costs and expensive consulting contracts. And even worse - paying for upgrades or a new version of the software that you recently purchased.

These providers are incentivized to sell, sell, sell because there’s often misalignment between the provider and terminal. This is the pressure to constantly and consistently generate returns for their organization to appease provider’s shareholders or parent corporation. This is the trap of becoming the market leader - the provider must lead the market and maximize revenue from the client.

One of the clear benefits of working, however, is that this type of solution is built for automation and connecting to other systems at the terminal. If you do 1 MM in TEU, then a more integrated and automated solution may be the way to go.

For terminals below the that level of throughput, we firmly believe that the SaaS model hosted in the cloud, rather than on-premise, is the penultimate solution.

Licensing your TOS software in a SaaS format has many benefits, including:


    - Simple pricing that handles almost everything related to running the TOS for your terminal.
    - The vendors absorb and manage the majority of costs and activities of hosting the solution (ex. The server, operating system, setup, security, software support and maintenance, training, onboarding, user management, upgrades, and the list goes on.)
    - Rapid development and improvement of the platform that ensure the relevancy of the TOS year in and year out. (For example, the Octopi TOS team listens to our clients, deploys updates weekly, and can quickly tailor the software to better fit the prospective terminal.)
    - A yearly pricing model that ensures that the provider can not only grow and scale with the terminal(s), but holds the provider accountable for performance. - A quicker training and onboarding experience that allows terminal teams to adopt the platform within 2-3 months.
    - Any security threats or compromises can be fixed unilaterally by the provider ASAP - within hours/days versus weeks.

SaaS solutions do not have a shelf-life. The software will remain relevant to the port terminal’s business throughout its usage and the terminal operator no longer has to worry about “hidden costs”. As long as the client pays the one time implementation fee, and yearly service fees, the TOS vendor should automatically include updates and new features as they’re added.

Going back to our real estate example, choosing the SaaS option would be comparable to a friend or family member allowing you to stay at his or her second property for a minimal cost devoid of the markup you would experience renting from an outsider party. It’s the ideal scenario.

Port Terminals: SaaS is the Future

To close, here’s a helpful graphic that compares SaaS to the traditional solutions:

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The SaaS based TOS is integral to the competitiveness and effective operation of the port terminal. In order to maximize productivity and ROI, we recommend opting for the SaaS based terminal operating system and team that considers your long term vision. Choose the team and software that has the capabilities to deliver what your terminal really needs, day in and day out, the second you begin using it and also 10 years later.


About Author: Miles J. Varghese
Miles J. Varghese

A relationship-oriented, #innovation-driving, Enterprise-focused, People-loving, Head of Sales at @Octopi_TOS. #miamitech #SaaS #maritime

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