Cloud Software vs Locally Installed Software
The practical differences between software you access through a browser and software installed on your own computers, and how to choose.
Business software comes in two broad forms. Cloud software, also called software as a service, runs on the provider's computers and you use it through a browser or app. Locally installed software runs on your own machines or a server in your office.
Most new business software is cloud-based, but local software has not disappeared, and for some situations it is still the better fit.
The basic difference
| Cloud software | Locally installed software | |
|---|---|---|
| Where it runs | The provider's servers | Your computers or server |
| Access | Any device with internet | The machines it is installed on |
| Payment | Subscription | Often a one-time license, sometimes with annual maintenance |
| Updates | Automatic | You install them |
| Backups | Usually handled by the provider | Your responsibility |
| Works offline | Rarely, or partially | Yes |
| Where your data lives | The provider's systems | Your premises |
| IT upkeep | Minimal | You maintain the hardware |
Advantages of cloud software
Access from anywhere. Office, home, a job site, a phone.
No hardware to maintain. No server in a cupboard to replace when it fails.
Always current. New features and security fixes arrive without anyone doing anything.
Easier collaboration. Several people can work in the same system at once.
Simpler to connect. Cloud tools generally have APIs and integrate readily with each other.
Predictable costs. A monthly fee instead of a large purchase.
Drawbacks of cloud software
You need a reliable connection. If your internet goes down, so may your business.
Costs continue forever. Over many years, subscriptions can exceed a one-time license.
You depend on the provider. They can raise prices, change features or shut down.
Your data is on someone else's systems. You are trusting their security and their terms.
Less control over change. An update you dislike arrives whether you want it or not.
Advantages of local software
It works without internet.
You control the data. It stays on your premises, which matters in some regulated industries.
No ongoing fee for some products, once purchased.
Stability. The software changes only when you choose to upgrade.
Performance for demanding tasks, such as large design or video files, can be better on a local machine.
Drawbacks of local software
You are the IT department. Updates, backups, security and hardware failures are yours to deal with.
Remote access is harder.
Disaster risk. A fire, flood or theft can take both the computers and the data, unless you have off-site backups.
It tends to fall behind. Businesses delay upgrades, and old, unpatched software is a security risk.
Harder to integrate with other tools.
Which should you choose?
Cloud usually makes sense when:
- People work from more than one location.
- You have no dedicated IT support.
- You want tools that connect to each other.
- You would rather not think about servers.
Local can make sense when:
- Internet at your premises is unreliable.
- Regulations or contracts require data to stay on site.
- You run specialist software only available as a desktop product.
- You work with very large files.
For general business tasks such as email, accounting, CRM, scheduling and documents, cloud is now the default for good reason.
The hybrid reality
Most businesses use a mix: cloud accounting and email alongside a desktop design package, for instance. Some software offers both, with a local application that syncs to the cloud. There is no need to pick a side for everything.
Security: which is safer?
Neither is automatically safer. It depends on how each is managed.
A reputable cloud provider typically has security staff, monitoring and infrastructure that no small business could match. But your account is only as safe as your password and access settings.
Local data is not exposed to a provider's breach. But it is exposed to whatever protections you have, or have not, put in place.
For most small businesses, a well-configured cloud service is the more secure option in practice, because the alternative is a server nobody is actively maintaining.
Whichever you use:
- Turn on two-factor authentication.
- Use a password manager and unique passwords.
- Give each person their own login.
- Remove access when someone leaves.
- Keep an independent backup of critical data.
CISA's guidance for small businesses covers the essentials.
Questions to ask a cloud provider
- Can I export all my data, and in what format?
- How is my data backed up?
- Where is it stored?
- What happens to it if I cancel?
- What security measures and certifications do you have?
- What is your track record on uptime?
Protect yourself either way
In the cloud: export your data on a schedule and keep a copy elsewhere. Do not assume the provider's backup is a backup for you; it protects them against their failures, not you against accidental deletion or a locked account.
On your own machines: follow a simple backup rule. Keep more than one copy, on more than one kind of storage, with at least one copy off site. Test that you can actually restore from it.
