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insight Encyclopedia


Premise-based software is located at a company’s physical location (e.g., on premise) and controlled by that company. The premise-based model, however, has largely fallen by the wayside in favor of virtual models, where software resides in the cloud.

For on-premise software, revenue happens when you ship the box. To illustrate the point, let’s pretend your software is actually a box of cereal at the grocery store. With cereal, the important thing is how many boxes you shipped to the store; you don’t care too much whether people are actually eating it or how they are eating it. You only really care about the metrics up until the boxes are sitting on the shelf at the store.

Consumers are able to pick out different foods and ingredients that they assemble at home to make their own meals. Similarly, with on-premise software, either the end consumer or the internal IT organization is responsible for picking the right things, putting them together, maintaining them with updates and patches, and deciding when they’re available for the business to use.

It’s the responsibility of the consumer to create a successful solution here, not the software manufacturer – just as it’s up to the individual to whip up a tasty meal at home, not General Mills.