IT teams strive to balance security, scalability, and adaptability when deploying enterprise IT applications. In this context, selecting the right Contract Lifecycle Management (CLM) software—on-premise or cloud-based—is critical.
While on-premise solutions emphasize control and security, modern cloud-based platforms provide unparalleled scalability, compliance readiness, and AI capabilities. As organizations manage increasingly complex contracts, the scalability and interconnectedness of cloud-based platforms stand out as key enablers of business efficiency.
What is On-Premise CLM Software?
On-premise CLM software is hosted on an organization's internal servers, requiring dedicated hardware and IT resources for deployment and maintenance.
Organizations with stringent data security policies and terms may prefer on-premise CLM solutions.
The most significant advantage of on-premise CLM is customization. Companies can choose to implement and customize software according to their business needs.
Enterprise IT teams opt to get professional help from an IT services provider or specialized CLM solution provider that implements custom CLM solutions for all their needs. This can lead to substantial productivity boosts due to ease of use and product-user fit.
Another benefit is long-term cost savings, especially if the company plans to use its on-premise CLM solution for many years. Maintenance expenses can be lower if the needs don't evolve much over time, optimizing the total cost of ownership.
However, a notable disadvantage is the high upfront costs and increased expenses associated with implementing and customizing the CLM solution.
What is Cloud-Based CLM Software?
Cloud-based CLM software is deployed on shared or dedicated remote IT infrastructure, which can be scaled according to business needs. The CLM solution hosted on cloud-based infrastructure eliminates the need for complex on-site installations, offering businesses a cost-effective, scalable, and highly accessible solution.
Cloud-based platforms offer pre-built APIs to efficiently interconnect data from multiple enterprise IT applications deployed on the same cloud platform. For instance, CLM data can be interconnected with vendor master data to manage vendor contracts.
One such industry-leading CLM software, Aavenir, is built on the ServiceNow Cloud Platform and offers robust integrations with other enterprise systems, including sourcing and procurement solutions, customer relationship management (CRM) systems, and ERPs like SAP.
The scalable computing power of cloud platforms enables organizations to execute advanced AI features for contract insights, automation, and decision-making across vast datasets.
Additionally, cloud-based platforms offer a comprehensive and consolidated approach to data protection, allowing organizations to operate with the highest level of control over their data.
Hence, cloud platform-based CLM solutions employ the capabilities to help you comply with compliance requirements for GDPR, SOC 2, DORA, and more, freeing up your team's time to focus on strategic goals.
Finally, unlike their on-premise counterparts, cloud platforms can support frequent software updates with zero downtime. Hence, cloud-based CLM software is a compelling choice for enterprises seeking flexibility, productivity, and long-term value.
On-Premise vs. Cloud-Based CLM - Key Comparisons
On-Premise CLM Solutions
- Security and Control: Hosting on internal servers brings unmatched control over sensitive data and aligns with stringent internal compliance policies
- Customization: IT teams can tailor on-premise solutions to meet unique enterprise needs, enabling deeper integration with existing systems
- Cost Structure: While initial setup costs are high, the total cost of ownership may stabilize over time if there is little need for upgrades
- Challenges: High upfront investments, limited scalability, and ongoing hardware maintenance can hinder agility
Cloud-Based CLM Solutions
- Scalability and Cost-Efficiency: Cloud platforms allow businesses to scale operations instantly without major capital expenditures, and subscription models ensure predictability in costs
- AI and Integration Capabilities: Cloud-based platforms like Aavenir seamlessly integrate with Enterprise Resource Planning (ERP), CRM, and sourcing solutions while leveraging AI for contract insights and automation
- Compliance and Updates: Frequent software updates ensure compliance with evolving regulations and minimize the compliance burden on IT teams
- Limitations: Subscription costs may rise over time, and customization options might be less extensive than those of on-premise systems
Bridge the Gap with Hybrid Solutions
Hybrid contract lifecycle management solutions can be a viable alternative for enterprises with diverse needs. In hybrid solutions, sensitive data can be stored on-premise while leveraging cloud features for collaboration and scalability. This dual approach empowers organizations to ensure compliance while embracing the flexibility of cloud-based platforms while addressing data control and compliance concerns.
Additionally, hybrid solutions are an excellent transitional strategy for companies planning to shift from on-premise to cloud-based CLM — or vice versa. They enable a phased implementation, minimizing disruptions and ensuring continuity during the transition process.
Why Choosing a Scalable Cloud-based CLM Solution Matters
A report from Gartner predicts that 51% of enterprise IT spending will be directed towards public cloud. Moreover, 65.9% of the application software budget will be directed toward cloud technologies in 2025, up from 57.7% in 2022.
Cloud-based CLM platforms are increasingly seeing wider adoption across organizations as they provide the necessary infrastructure to implement advanced AI solutions, enabling organizations to efficiently manage and analyze huge amounts of interconnected data.
This scalability ensures your business can leverage powerful tools like AI-driven contract analytics and real-time decision-making, eliminating the bottlenecks.
Furthermore, your organization's cloud infrastructure can address your compliance challenges with the help of pre-built frameworks. This will help you adhere to industry regulations such as GDPR, SOC 2, HIPAA, and DORA.
The best thing is that, unlike on-premise solutions that demand extensive internal IT resources to maintain compliance, cloud platforms integrate updates automatically, ensuring businesses always meet the latest standards.
Modern businesses operate in dynamic environments that demand flexibility, speed, and innovation. Cloud-based CLM solutions align perfectly with these needs by offering:
Real-time Collaboration: You can access contracts from any location, enabling remote work and global operations
Future-Proof Infrastructure: You can easily adapt to regulatory changes without disrupting workflows
Advanced Data Management: Get ready to harness AI to extract contract insights and optimize contract performance
- Reduced IT Complexity: You can eliminate the need for extensive in-house infrastructure and ongoing maintenance
An organization's decision to choose on-premise or cloud-based CLM software is always backed by its unique requirements and strategic decisions. While on-premise systems cater to businesses seeking control and customization, cloud-based solutions excel in scalability, compliance, and innovation. For most modern enterprises, the flexibility and cost-effectiveness of cloud-based CLM solutions make them the preferred choice.
Aavenir's AI-powered CLM solution exemplifies the advantages of cloud-based platforms. It offers seamless integrations, scalability, and advanced AI-driven features to streamline contract management processes.
Ready to transform your CLM process but not sure how to proceed? Contact the CLM experts at Aavenir for a free (no-obligation) demo today.
Frequently Asked Questions
1. What are the differences between on-premise and cloud-based CLM software?
On-premise solutions require local servers, offering complete control and customization but with higher upfront costs. Cloud-based solutions are hosted remotely, providing scalability, accessibility, and lower initial costs. Providers manage updates and maintenance.
2. How do cloud-based CLM solutions ensure data security and compliance?
Cloud-based solutions employ advanced encryption, regular audits, and compliance certifications like GDPR and ISO 27001. Providers implement the latest security measures, ensuring robust protection and compliance with industry regulations, reducing the burden on internal IT teams.
3. What factors should large enterprises consider when choosing between on-premise and cloud-based CLM software?
Enterprises should evaluate data control, compliance requirements, budget, scalability, and IT resources. On-premise is ideal for stringent data control needs, while cloud-based offers flexibility, lower costs, and easier integration with existing systems.
4. Are cloud-based CLM solutions more cost-effective than on-premise ones?
Yes, cloud-based solutions have lower setup costs and operate on subscription models. They eliminate the need for costly hardware, ongoing maintenance, and IT staff, making them more budget-friendly over time than on-premise systems.
5. Can on-premise CLM systems be migrated to cloud-based platforms?
Yes, but migration from on-premise systems requires careful planning. It involves data migration, system integration, and ensuring compatibility. Many cloud-based providers offer tools and support to streamline the transition process for on-premise systems.
