Managed Applications vs SaaS: What’s the Difference?

Over the past couple of decades, the way businesses have accessed and used software applications has changed dramatically. Those days are gone when companies had to spend big on expensive on-premises infrastructure and software licenses upfront. With cloud computing, organizations today have new flexible consumption models that allow them to make use of advanced software services from the cloud on demand today!

Today, two of the most popular ways to deliver business applications are through managed applications and software as a service (SaaS). However, what exactly is the difference between one and the other? Which approach offers the best unique benefits and downsides? What is the best choice for modern organizations?

In this comprehensive guide, we’ll cover everything you need to know about managed application services vs SaaS, outlining:

• Definitions and key characteristics
• Pros, cons, and use cases
• Cost structures
• Implementation and management
• Security considerations

Let’s dive in.

Managed Applications

Business software that is deployed, hosted and managed by a third-party provider is known as managed applications. Here, the software vendor still owns the application (the application itself), but it is packaged and running in the cloud infrastructure of a managed services provider (MSP), not on the software company’s (SPC’s) servers.

Key attributes of managed applications include:

• Software owned by vendor, but computing infrastructure owned and run by MSP
• Available as public multi-tenant or private single-tenant
• Monthly subscription fees based on the number of users
• Management of updates, security, availability etc., handled by MSP
• Easy to scale capacity up and down

Examples of business applications we commonly have today include enterprise resource planning (ERP), customer relationship management (CRM), human capital management (HCM), counter operation and platform-making collaboration. Rackspace, Amazon Web Services, Google Cloud Platform and Microsoft Azure are leading providers of managed applications.

SaaS

Software as a Service (SaaS) is the delivery of application software over the Internet to users who need not install or manage the application on their computers. SaaS apps are accessed by users over the internet, usually on a subscription basis, and they do not need to worry about the underlying infrastructure.

Typical characteristics of SaaS solutions include:

• Software and hardware owned and managed by SaaS provider
• Web-based access from any device with an internet connection
• Pay-as-you-go subscription pricing based on usage or user count
• Automatic updates and maintenance built into the platform
• Scales easily up and down on demand
• Multi-tenant architecture serving multiple customers

Today, common examples of SaaS applications are office productivity suites such as Google Workspace Microsoft 365, Customer relationship management tools like Salesforce Zoho, project management apps such as Asana and file sharing and backup services such as Dropbox. Salesforce, Workday, Adobe, Zoom and ServiceNow are some of the largest SaaS providers in the world.

Comparing Key Pros and Cons

Now that we’ve defined both managed applications and SaaS models let’s compare some of the unique benefits and potential drawbacks of each approach:

Managed Applications

Pros:

• Deep customization capabilities
• More control and flexibility
• Can replicate the on-prem environment in the cloud
• Potentially improved security and compliance

Cons:

• Generally more expensive
• Vendor lock-in is possible
• Still need in-house IT skills and resources

SaaS

Pros:

• Fast time-to-value and scalability
• Lower upfront costs and pay-as-you-go model
• Automatic updates and new features
• No hardware or software to manage

Cons:

• Limited customization options
• Continuous internet connectivity required
• Potential data security and privacy risks
• Vendor lock-in is likely over time

Managed Cloud Applications: Ideal Use Cases

Large enterprises that need to replicate the functionality, security and customizations of an on-premises system in the cloud but don’t want to manage the underlying infrastructure would be best served by managed applications.

Other ideal use cases include:

• Transitioning complex legacy systems to the cloud
• Highly-regulated industries like financial services and healthcare
• Custom software with proprietary code and integrations
• Applications with significant uptime, security and compliance requirements

SaaS: Ideal Use Cases

The SaaS model offers the fastest time-to-value and easiest scalability for businesses that want off-the-shelf cloud capabilities without large upfront investments.

SaaS is well suited for:

• Startups and small/medium businesses
• New software needs where simplicity and cost take priority over customization
• Companies without large in-house IT teams
• Point solutions and supplemental apps that extend core systems
• Business software that requires frequent upgrades and innovations

Comparing Cost Factors

Both managed applications, and SaaS provide more flexible consumption models than traditional on-premises software. But there are some notable differences in how each option is priced that impact overall costs:

Managed Applications

Managed applications typically have higher upfront costs than SaaS solutions. The customer usually pays an initial migration fee plus a monthly subscription fee based on the number of users per application. Subscription fees give customers access to software licenses, technical support, infrastructure, security, and service-level agreements (SLAs) in one bundle.

Additional fees may apply for:

• Custom integrations
• Customizations beyond the base code
• Consulting and professional services
• Adding more cloud capacity or capabilities

Over time, though, having an MSP manage the infrastructure and software can reduce some costs compared to managing applications in-house.

SaaS

A key advantage of SaaS solutions is very low upfront investment. Instead of large migration projects, most SaaS apps can be up and running in days or weeks.

On an ongoing basis, SaaS tools use a pay-as-you-go subscription model based on usage and user counts, allowing you to scale up or down. Subscription fees typically cover everything from the software licenses to hosting, maintenance, and customer support.

Additional charges may include:

• Overage fees if you exceed usage thresholds
• Add-on functionality offered premium d at the price
• Integrating with other applications and data sources
• Customizations beyond what the platform allows

Over time, the total cost of ownership of a SaaS can exceed that of an on-prem system. Butility and operating expenses rather than the shift to expenses make capital very attractive for modern business needs.

Implementation and Management

Deploying and managing applications under each model also comes with key differences:

Managed Applications

While managed service providers handle most of the deployment, infrastructure, and application management, implementing managed applications still tends to be more complex compared to SaaS solutions. Migration projects are generally multi-month endeavors requiring some in-house IT involvement for tasks like:

• Transitioning and integrating data
• Configuring workflows and settings
• Creating custom fields, objects, and rules
• Testing and training
• Change management

Ongoing responsibilities may include:

• Managing core integrations
• Monitoring performance dashboards
• Submitting change requests
• Addressing end-user issues
• Data and functionality oversight

SaaS

A major benefit of SaaS apps is that they are fast set up with very limited IT requirements. In many cases, you can get started in just days by:

• Provisioning user logins
• Importing data if needed
• Conducting simple configurations
• Completing online training

Ongoing oversight is also minimal. The SaaS provider manages everything from the physical infrastructure to the software code. Internal teams are mainly responsible for the following:

• Adding/removing user licenses
• Setting high-level preferences
• Integrating with complementary apps
• Engaging customer support if needed
• Monitoring usage and adoption
• Budgeting costs

For the most part, users can leverage SaaS platforms on their own with minimal supervision. Administration is simplified through centralized dashboards.

Assessing Security and Compliance

No discussion of cloud application models is complete without touching on security and compliance considerations. There are some notable differences between managed apps and SaaS when it comes to data protection, privacy, and adhering to industry regulations.

Managed Applications

Managed applications replicate an on-premises environment in the cloud and offer familiar security controls and greater visibility into the full application stack. Dedicated infrastructure helps isolate data and meet strict compliance mandates like HIPAA and PCI.

Managed providers also conduct rigorous security reviews across infrastructure, applications, and personnel. Customers can further enforce strict governance policies and add advanced protections like:

• Encryption
• Role-based access
• VPN tunneling
• Data loss prevention
• Intrusion detection

The major cloud platforms offer a host of compliance certifications (SOC, ISO, etc.) that can be applied to managed apps hosted on them.

SaaS

Traditionally, security and compliance were seen as riskier with SaaS solutions since applications come with other customer data in the cloud. However, most modern SaaS providers match — or even exceed — the data protections that organizations can achieve on their own.

Standard SaaS security best practices include:

• Encrypted data transmission and storage
• Robust access controls and activity logging
• Advanced threat detection
• Regular audits and penetration testing
• High availability and disaster recovery
• Integrated data backup

Top SaaS vendors also pursue rigorous compliance certification for data privacy, security posture, business continuity planning, and cross-border data handling when relevant.

The extensive standards adherence for major public cloud platforms like Microsoft Azure, AWS, and Google Cloud provides a trickle-down effect for the security and compliance of SaaS applications hosted on them.

Making the Right Choice

Deciding between managed applications vs SaaS ultimately comes down to your organization’s unique needs, priorities, and cloud strategy:

For larger enterprises that are taking a ‘lift and shift’ approach to the cloud, managed applications make sense as they are replicating current on-prem systems. This model is conducive to p. Migrating financial service and healthcare-related legacy systems, maintaining security, compliance and custom capabilities.

For organizations of all sizes, the time has come to the realization that SaaS is ideal for TCO savings, agility, and innovation found in the cloud. For everything from supplemental apps to brand-new platforms that drive digital transformation, the self-service, pay-as-you-go capabilities excel.

In some cases, companies opt for a hybrid model — standardizing on SaaS for broader business capabilities like email, collaboration, and CRM while using managed services for custom legacy systems or apps housing sensitive, regulated data.

Key Takeaways

Here are some of the most important managed applications vs SaaS differences and considerations to keep in mind:

• Managed applications utilize vendor software but reside on managed service provider infrastructure, while SaaS solutions encompass the full technology stack in the cloud.
• Managed applications allow greater customization and configurability similar to on-premises systems, while SaaS offers more out-of-the-box functionality with custom limitations.
• Implementation and migration are much faster for the SaaS model compared to managed applications.
• Ongoing management effort is higher for managed applications versus SaaS to coordinate with the service.
• Managed applications higher provider have up costs replicate front but can advanced security and compliance of legacy systems. SaaS solutions have minimal startup costs but may require additional security controls.
• Use cases differ based on factors such as enterprise size, industry, legacy vs. greenfield deployments, IT skills, and overall cloud strategy.

As cloud consumption models continue maturing, we’ll likely see more blending of managed and SaaS capabilities to give customers choice and flexibility. But for now, assessing the core differences outlined in this guide will help you make the right application decision for your business needs.