Research report: Customer Demand Drives On-premises Software Growth

Nikki Rouda
Sep 26, 2022

Every year Replicated commissions an independent research firm to study the market for commercial software deployed into any customer-managed environment (referred to here as “on-prem” which includes self-managed Kubernetes services in the cloud like EKS, GKE, and AKS.) Perhaps surprising to prevailing wisdom, this year’s report shows just how strong the demand continues to be for on-prem software. Spoiler: this segment is alive and thriving. Traditional software vendors need to modernize their offerings to stay competitive and serve their customers, while SaaS companies need to come up with a workable on-prem solution to avoid losing business. Replicated can help!

Finding 1: On-prem software is a growing business

Software companies continue to report growing on-premises business with 4 out 10 stating it makes up more than half of their revenue. For those who offer on-prem, 75% have seen that market segment grow. In fact, 80% of these companies plan to continue to offer more on-prem than SaaS-based solutions. 

75% see growth in on-prem software business

Although much has been reported about increased SaaS use, 30% of companies have recently started offering on-prem software (able to be deployed in customer-controlled environments including VPCs on cloud) in just the last three years to meet customer requirements. 

30% of companies have recently starting offering on-prem software

With more than 4 out of 10 participants indicating their company is losing revenue by only offering SaaS, it explains why nearly 70% of those companies are planning to offer on-premises options.

42% are losing business by not having an on-prem option

Finding 2: Customers are driving the demand for on-prem solutions

Customers are the bottom line, and 93% are happy with their on-prem software. It’s good business to give customers the solutions they need. 

93% of customers are happy with their on-prem software

Customers need flexible installation options to reach different environments. A smart software company is going to serve customers everywhere they want to run their software.

Where customers want to run software

On-prem software requirements are driven by concerns about security, data sovereignty, costs, control, culture, and many other factors. By offering an on-prem deployment option to customers, you can help meet those needs and expand your product’s value.

Why customers want on-prem software

Yet there is a gap in the market, as many software companies don’t support all the environments customers need to operate in today. Sectors like government, finance, and health care require air gapped support for sensitive data. Less than 40% of software vendors can deliver those air gap installations, and only 46% can support installs into all the major public cloud platforms, forcing their customers to sacrifice security and/or choice.

Finding 3: Vendors need to be able to install software faster

More than 8 out of 10 companies are shipping software on Kubernetes today, offering easier packaging and installation across more platforms, even though a majority of companies indicated that at least half their customers were new to Kubernetes. This creates friction which is magnified by a Kubernetes skills gap, and the result is usually slow and painful installations during Proof of concept (POCs).

Proof of concepts remain critical for 93% of software companies, with more than half reporting they take 8 or more days to implement. That valuable time could be spent evaluating the solution, closing deals sooner, or helping other customers and prospects. 

Many on-prem POCs take more than a week to get started

Nearly all (96%) companies reported 6 or more employees are tasked solely with on-prem deployment, and one third have more than 50 team members assigned. The more POCs, the bigger the drag on your field engineers and developers who help them.

This problem isn’t limited to POCs either. 84% of respondents stated it took a week or longer to install and configure their software in production environments for their customers, with software issues and limited deployment staff causing longer delays. 

Finding 4: Problems continue even after installs are done

More than 7 out of 10 companies reported receiving 4 or more new support issues each month, and 83% stated it typically takes more than a day to resolve each issue for an on-prem customer. 

The bottom line: Software vendors need help meeting the needs of their on-prem customers

On-prem software continues to grow and drive significant business for most software companies. However, companies need an easy and flexible way to install their software in a multitude of environments. They also need a solution to reduce the personnel resource costs for POCs, on-prem deployments, and support. Faster deployments with fewer issues is something that benefits both customers and the bottom line.

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About this study

Research goal: Capture and document current trends for on-premises software. The research sought to understand market demand, customer needs, revenue growth, and future software development plans. Sales and deployment requirements, installation challenges, company personnel requirements, and the use of Kubernetes were also investigated.

Methodology: Executives, business, and technology professionals at all seniority levels representing software companies of all sizes were invited to participate in a survey on their company’s on-premises software development, delivery, and strategy. The survey was administered electronically, and participants were offered a token compensation for their participation.

Participants: A total of 584 qualified participants completed the survey. All participants had direct software responsibilities. Participants were from 5 continents representing a global view.