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8 Factors Hoteliers Should Consider for Cloud vs. On-Premise Software

Hospitality managed services

In simple terms, there are two ways that hospitality technology can be implemented at a property: the traditional IT environment where all the hardware, software, and networking is managed on-site versus cloud based solutions.

On-premises software (sometimes abbreviated as “on-prem”) is installed and runs on computers on the premises (in the building) of the person or organization using the software, rather than at a remote facility such as a server farm or cloud. On-premises software is sometimes referred to as “shrinkwrap” software, and off-premises software is commonly called “software as a service” (“SaaS”) or “cloud computing.”

— from Wikipedia

There are benefits to each method when selecting hospitality IT solutions. Your choice depends on a variety of factors.

Factor #1: Geography

The robustness of your internet connection is critical to any cloud based applications you are using. If the internet connection goes down, you lose access to any cloud based applications.

With on-premise applications, you maintain access to your software even when you lose your internet connection. As long as the server that runs that application is physically located on your property, you’re always in control. You don’t need to worry about your internet connection, and (if you have a backup generator and have configured the application’s server to run on emergency power) you don’t need to worry about loss of power either (at least from the standpoint of using applications!).

 

Hospitality IT services

 

The stability of your internet connection is greatly impacted by your geography. Are you located in an area that is prone to hurricanes or other extreme weather conditions? Is your internet connection very stable, or does it frequently get knocked out and you have to wait for it to come back up? A property located in the Caribbean will be at much greater risk for internet outages than one in Atlanta, Georgia.

Do you have redundant internet connections? If you plan to use cloud based applications, it is critical that you use redundant internet providers, and, depending on your location, this may not always be possible. Some locations do not have the availability of multiple ISPs from which to choose.

Factor #2: Impact to Operations

If you move an application to the cloud and lose internet connectivity, what’s the impact to the operation of your hospitality business?

Some of your applications are used only by your staff and have no effect on a guest’s experience. Some directly impact your guests, and some fall in between, which means they affect both your staff and your guests.

Think about what would happen if the application went down for a few hours — what would be the impact? If an outage doesn’t directly affect your guests, and your staff is not left idle waiting for the application to become available, cloud may be a good option. On the other hand, if an application outage prevents guests from checking in to your hotel, that’s a big problem.

Applications that are staff facing only, such as certain engineering or finance programs, might be good candidates to move to the cloud.

Factor #3: Total Cost of Ownership

At the start of implementation, cloud based systems may be more affordable because you are not making any huge investment in hardware. With on-premise systems, you typically purchase your own hardware so you can plan on a significant capital expenditure in the beginning.

Is it important to minimize startup costs, or are you in it for the long haul? The costs for cloud based applications are generally considered part of operating expenditures where you are paying a fixed monthly charge. On-premise system costs can vary from month to month. In the beginning, costs will be higher when you initially buy the software and hardware, then can also spike during months when you upgrade.

As time goes on, the cost expenditures made for on-premise software will catch up to the cost savings realized with cloud based systems. If you keep the systems long enough, your monthly expenditures for on-premise software will be less than the fixed monthly cost you are paying for cloud based systems. Depending on the application, the cost trends reverse in two years, five years, or ten years, etc.

Tipping point

(from CEB blog, https://www.cebglobal.com/blogs/how-to-explain-cloud-migration-costs-to-the-cfo/)

There may be greater labor related costs with on-premise applications since the application will need to be installed on many machines.

Factor #4: Customization

On-premise software enables a high level of customization. In contrast, cloud based software is fairly limited in how much it can be customized because there are multiple users accessing the same platform. Since customization is limited with cloud based systems, implementation time is typically shorter.

Think about how important it is to you to be able to customize your system. For example, if you have a loyalty program, you may have a need to award points for activities that are specific to one property. One of your hotels may want to offer a free meal after a certain number of hotel stays, another might only offer a discounted meal, and yet another might offer a free pass to the beach. There are multiple options that may be specific to an individual property, such as a kids program, restaurants, water slides, or beach access. With a cloud based system, you might have unique experiences that you want to enter into the system but a lack of customization limits you.

Cloud based applications are well suited for large hotel companies with many locations where the guest experience is fairly consistent and the majority of guests are business travelers.

Factor #5: Prevalence of Mobile Apps

Many properties offer their own mobile apps to make the guest experience more streamlined. Hotels have the ability to email a guest prior to arrival, prompting the guest to download the hotel’s mobile app. Doing so enables the guest to check into the hotel upon arrival and use a smartphone as a room key without stopping by the front desk. Then, the guest can continue to use the app for such activities as controlling the TV or ordering room service.

Because they are already connected to the internet, mobile apps are well suited to cloud based software. If you are already using cloud based software, it’s easy to add the mobile app. On the contrary, to add a mobile app for an on-premise application, you need your own web server or you need to host it on a public cloud service. The connection between the on-premise software and the mobile app would be done through APIs or SDKs.

Factor #6: Data Ownership

How important is your data to you? You need to be very careful when considering the move to cloud based systems as some providers of cloud based solutions may keep your data if you discontinue their use. You must read the contract carefully.

If the relationship with your cloud based application provider ends, you must be able to get your data back. Think about what would happen if you lost several thousand guest reservation records.

A report of your data is not sufficient; instead, the data must be in a usable format, meaning that it can be imported into another system. Ideally, you should be able to export your data from your cloud based application and then import the data to your new system seamlessly. Access to your data in a usable format can mean the difference between three minutes versus three months.

Factor #7: Data Security

As a property owner, you are storing a lot of personal information, including credit card information, and that information needs to be protected.

When using a cloud based application, your security is in the hands of the vendor. You should thoroughly research the security measures put in place by the vendor to protect your data. You need to make sure the vendor complies with standards for PII (Personally Identifiable Information) and PCI DSS (Payment Card Industry Data Security Standard).

With on-premise software, the security of your data is in your hands, for better or worse. You will need the right people in place with the right experience to ensure your data is kept secure. This may be your own staff or consultants with expertise in cybersecurity.

 

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Factor #8: Backup & Disaster Recovery

With on-premise software, it’s important that you back up your data. If multiple properties are involved, you can store backed up data from one location to another. Alternately, you can back up your on-premise server to the cloud, so that you are protected.

By definition, data from your cloud based applications is already backed up, but you should verify how this is done to ensure that in the event of a disaster you would not lose your data.

Choose Wisely

For many applications used by a hotelier, you have a choice between cloud based and on-premise. Which path you choose will vary for a specific property and for certain types of applications.

In my opinion, the applications that should be kept on-premise and not move to the cloud include PMS (Property Management Systems) and POS (Point of Sale) systems. Others might argue that these should be the first systems to move to the cloud.

But here’s my thinking.

If there’s a hurricane or other major weather event, and my building has not suffered significant damage, my property will become a haven for those seeking shelter. There will be a lot more people in the building than normal. That’s a terrible time for my reservation system to become unavailable because the internet is down even though the remainder of the building’s systems are operating normally.

Owners of properties not in climates prone to major weather events may see things differently.

But consider this.

I can recall certain PMS applications that tried moving exclusively to the cloud years back. The big benefit to the property owner was the automatic end-of-day reporting and integrated patch management — the hotel no longer needed to worry about these issues. Unfortunately, there were major issues when there was a loss of internet connectivity, so vendors once again made these systems available in an on-premise option.

If a hotel with many locations uses a consistent setup, cloud based systems can work well. But in the scenario of multiple unique properties, it will be difficult to put that type of business on a cloud based application.

Vendors are recognizing that not every property is the same. Many vendors who originally tried moving to a cloud based model had to step back. Today, most vendors offer both on-premise and cloud based solutions so that they can serve any type of hotel. Some hospitality businesses are using both types of applications: on-premise for specialized resorts and cloud based for corporate type locations.

 

Outsourcing IT services white paper

 

I can understand putting certain applications such as procurement systems, financial systems, or even human resources systems in the cloud. The up-time of these systems is not crucial to the daily operation of a hotel.

Then there is the category of applications that are heavily used on mobile apps, including systems for guest services, engineering, security systems, and housekeeping. These can be put in the cloud as long as there is manual failover capability. That route provides the best of both worlds, ensuring these applications can be used even if you lose internet access, but taking advantage of the cloud to facilitate the use of mobile apps.

There are certain key systems critical to the operation of a hotel. The ability to check guests in and out is at the core of the hotel. Without critical systems, the hotel can’t operate. So tread carefully when considering which applications to put in the cloud.

In an emergency, as long as your front desk and housekeeping departments remain operational, your hotel can function.

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Karen Faircloth

Over the course of her 35+ year career, Karen has worked exclusively in the hospitality industry. She has deep technical expertise in hospitality IT and her experience spans a wide range of roles working for both hoteliers as well as technology companies.

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