On-Premise vs SaaS Product Management: The Main Differences
Updated: Mar 28, 2021
Product managers are responsible for building products that customers love while meeting the business's needs. There is a lot of information available on product management techniques to be successful, which include:
market & customer research
validating hypotheses and prototypes
eventually building the product if product-market fit was found
getting the product to market
However, there's little to no information on differences when building On-Premise vs. SaaS (aka Cloud) products.
The biggest difference between On-Premise vs. SaaS (aka Cloud) products is its distribution model. On-premise product management involves installing and running software on an organization's or client's premises. On the other hand, SaaS solutions involve a software licensing and delivery model where you offer subscription-based software, hosted by the vendor. Additionally, on-premise products will occasionally have an option for bundled hosting, which is also called a Cloud Solution, but it is really the same on-premise solution, only hosted by the vendor itself.
In a SaaS environment, the software provider takes care of the software updates, including releasing new features, security updates, bug fixes etc, whereas in On-Premise solutions, the vendor also provides these updates, but it’s up to the client to apply these updates. There are also other differences from a customer's perspective, such as costs, level of customization available, control over the software, etc.
From the product managers perspective there are even more significant differences to be aware of, and thus the same product management approach for an On-Premise vs. SaaS products won't work.
Let's look at the essential product management techniques and how they are different for On-Premise vs. SaaS products.
As a product manager, understanding your customers should always be your top priority. The majority of your time should be spent talking to customers, understanding their needs and pain points, so you can develop the right solution to enable these customers to grow and succeed with your product.
Having diversified customer feedback will give you insights into how customers expect to use your product in ways you may not have imagined. That said, you have different options available to you when it comes to gathering customers' feedback in both On-Premise and SaaS environments.
On-Premise Solution typically requires a lot of extensive user testing up front to validate the direction and solution. You will most likely want to visit customers to observe their in-product behavior and perform offline interviews to know their needs and problems since you as Product Manager can’t access your customers software to see them using it. You might also want to involve your customers in the decision-making process to validate the product-market fit.
SaaS Solution additionally gives you an opportunity to validate different solutions before committing to one using in-Product A/B testing. You also would be able to collect insights from available analytics tools to understand product usage patterns. As a result, you're way more flexible when committing to the product solution you want to be built.
So after you've collected enough customer feedback and have a pretty solid idea of the solution you want to build, its features, and capabilities, it's time to plan your release. We've all read a lot about Agile & Scrum, and you probably wonder why some of these principles aren't necessarily applied to your product. The good thing is that you aren't alone. There are also significant differences in how you can plan your releases for On-premise vs. Saas products.
On-Premise products are typically planned ahead by adapting a waterfall approach for planning and release scoping. In this case, the product has a larger iteration with a bigger release scope to minimize upgrade frequencies. For this reason, On-Premise products have only several updates a year, and most of the time those release dates could be predetermined (e.g. on-premise product might be released every quarter, or twice a year). Since it’s up to customers to apply these new versions, you as Product Manager and your counterparts in Product Marketing need to be more diligent in your communication and expectation settings with your customers, as they need to take the time to upgrade to the new version of your product.
SaaS solution allows you to be truly agile and apply more of a test and learn approach. It will enable you to have smaller iterations when releasing new features and capabilities, and you can make incremental improvements as you understand customer usage. SaaS products sometimes are being released daily, or even a few times during the day, so the number of releases are quite high. These releases are typically done behind-the-scenes without any customer involvement. Additionally, you also have an option to use A/B testing where different cohorts of customers can use different versions of your product at the same time, which helps Product Managers find what really works for the customer better.
Lastly, when it comes to product adoption, there are some differences in measuring and influencing product adoption for on-premise vs. SaaS solutions.
In the On-Premise scenario, you can only know the number of downloads of your product if the product is publicly available or a number of purchases if it requires a contract. It gives you a rough idea of product installs on the premises of your customers. But because of its nature, you can't access how your customers use the product, which features and capabilities are being used the most, and which areas require the most improvements. All this feedback will be coming from your extensive customer feedback discussed earlier, or through Account Management, Support and Sales organizations etc.
In the SaaS scenario, the product is hosted by a vendor (your company), which gives you a clear picture of the number of users it has. Using the right product analytics tools, you can access information about feature usage, customer usage patterns and even observe customers manipulating your product. It gives you invaluable insights that, if used right, can help you further develop your product in the right direction.
To summarize, both On-premise and SaaS solutions are great ways to distribute software to the customers. And depending on the industry and customer needs, one can work better than the other. From a product management point of view it is very important to realize these differences and apply the right product management techniques when building these products.
You can learn more about this topic in my presentation at Products That Count: https://vimeo.com/397180158