Self-Hosted vs SaaS: an Argument on Behalf of Small Businesses

Sergey Melkumov
Small and Dangerous
7 min readJul 11, 2020
Photo credit: garloon via Envato Elements

We all use apps, no matter what industry we are from. In fact, according to one study, on average, each employee uses around eight apps in an office environment, while the number of total apps used by companies can be between 40 and 200+, depending on the size of the company in question.

Source: 2019 Annual SaaS Trends Report by Blissfully

But should we question more vigorously how to run them and which apps to use given the option? True, one can easily subscribe to Microsoft 365/Google G Suite for their word processing, emailing, and cloud storage needs, pick the cheapest Customer Relationship Management app, or the most beautiful Project Management app. Maybe get that trending Tableau app and just concentrate on your work and not on technical details.

However, with just a little effort (a weekend project for most SMEs), you can easily replace practically any app in your workflow currently provided via Software as a Service business model to a self-hosted open source app that runs from your own Virtual Private Server.

Why would you do such a thing? Well, there are pretty substantial concerns regarding many existing and most popular SaaS apps out there when it comes to privacy and costs. Not to mention an inherent desire one might have to customize their apps or ensure a consistent workflow.

A Matter of Privacy

Let us put aside the issue of cybersecurity or unintentional leaks associated with a good old fashioned human error for a moment. Honestly, these can affect anyone anytime and, at this point, are as easy to control as forces of nature. Not impossible, but never 100%.

Instead, let us look at vast amounts of information passing through great many SaaS providers you might be using today. This information may contain your ideas, designs, code, plans, discussions, agreements, sales, and so on. Basically, everything that constitutes intellectual property and trade secrets specifically. Most important commodity in the XXI century.

A human being cannot possibly read everything that 4,57 billion people using the internet today store in their Dropbox or have written using Word or discussed on Zoom, but this is where Artificial Intelligence comes in.

Now, please do not call me out for being excessively paranoid because some corporations have already admitted in public their ability and desire to use our business data for their benefit. In 2016 after the purchase of LinkedIn by Microsoft, its CEO Satya Nadella in a letter to employees stated that the information stored in Office 365 and Dynamics is to be used contextually to bring together new experiences to customers using both platforms.

Meaning this SaaS provider does have unrestricted access to documents, spreadsheets, presentations, and anything else stored by us in the cloud.

How can a large corporation potentially abuse this access to confidential information, you may ask? Please have a look at the case of Amazon: after a small investment in June Life Inc, a manufacturer of smart oven devices, Amazon produced its version of the product the next year, now acting as a main competitor to June Life. Clearly, access to June Oven’s R&D helped.

Imagine if this so-called copycat business model can be automated with the help of an AI trained to identify new market niches and products using your, virtually free, labor. Well, someone at Redmond came close to imagining it, and it is not even free as you also pay subscription fees for the service.

A Matter of Costs

Let us begin with a tale of a monthly non-committal subscription and acknowledge it is a myth. A myth that once was but no more. You must have noticed an industry trend to put monthly price offers on storefronts, but ultimately locking them up behind a substantial premium at check out. Another trick up SaaS provider’s sleeve is only to sell annual subscriptions.

Source: Microsoft offering monthly subscriptions with an annual commitment

However, small businesses often have a rather high turnover of people and not necessarily because of poor working conditions, but because of how business is structured (project and seasonal work, for example). This situation results in you paying extra for licenses you might not use, or your team members needing to share an app disrupting their workflow (and most definitely breaching your license agreement with the SaaS provider).

In another scenario where you have a team of 6 on-and-off employees, and you need to supply them with essential tools mentioned in the introduction to this story, it will add up to something around $109 per month. These costs would include subscriptions for Microsoft 365 (Office + OneDrive + Teams) and Monday (CRM + Project Management solution) for six people.

Alternatively, for $40 per month, you can get an Amazon Lightsail instance capable of running ONLYOFFICE + Nextcloud open source apps that should be a decent substitute to the tools above and can handle up to 10 concurrent users. It will also run your website, invoicing app, and maybe a Business Intelligence app. This way, economies of scale often attributed to Cloud Computing work for you and not SaaS provider’s profit margin.

Source: Sergey Melkumov using Cloudron

If you struggle with technology or have no one on your team with basic web server admin skills, throw another $15-$30 a month for an app called Cloudron or a similar solution. Apps like these allow you to manage all your digital and IT infrastructure in one place without much headache, fully automating backups and recoveries if something goes wrong.

A Matter of Stability

As with everything it does, the media loves to put an extra emphasis on occasional hiccups popular SaaS providers make, especially if they are publicly traded companies. You might have heard about past cases of Salesforce, Cloudflare, Discord, and even Google Cloud Platform being down for hours or even days, but let us be honest, it so rarely happens.

In fact, a self-hosted solution may actually be at a disadvantage here by a matter of extra minutes spent on restarting your VPS or updating installed apps if you are not paying extra for a staging server that is. In hindsight, the COVID-19 pandemic likely did more damage to your business than a couple of minutes of downtime for your email or invoicing application.

What is damaging is continuously changing your workflow on a whim of your SaaS provider since, for them, apps are just products, however critical they may be to your business. New managers and designers come and go. Creative juices flow. As a result, products change, features get removed, repackaged, or lost in rebranding or M&A fallout. Service is transformed into something unrecognizable, whether you like it or not.

With a self-hosted solution, you protect your workflow by choosing which version you run. If it is an open-source application (which it often is), you can modify it to your own personal perfection that can last you a decade.

A Matter of Customization

Now take a step back and think why you would even want to white label or customize your digital infrastructure if you, for example, sell architectural plans online or manufacture sofas and armchairs to sell in bulk?

Well, it comes down to customer experience. Imagine for a moment that at every step of the sales cycle your customer interacts with your business through digital apps branded in your corporate colors that also tailored to your industry or product. These apps could be accessible via subdomains like files.company.com, analytics.company.com, or even minecraft.company.com for some corporate R&R. Such setup looks professional, and appearances do sell.

It may be just my experience, but I have consistently noticed a sort-of dismissive attitude in certain industries towards open source solutions. However, you integrate an extra feature and implement some white label tweaks here and there to your storefront, invoices, file sharing app, collaboration tools, or even a chatbox and voilà! It looks like a custom solution and a great value proposition.

Unfortunately, many SaaS providers hide white labeling options behind enormous paywalls. For example, Metabase, a neat little Business Intelligence app, will only allow you to change the default colors of charts it generates for $10,000 per year and just like many others — no customization option for its features.

Solution? Self-hosted! Even if your company does not have developers on staff, you might know from managing something as simple as a WordPress blog how easy it can be to customize apps based on open source code. Hire a freelancer on platforms like Upwork and enjoy a long-lasting result.

Conclusion

Consider all the benefits and weaknesses of self-hosting some or all of the apps you use. Maybe experiment a little on the weekend before deciding as there are tons of guides and HowTos out there for any advanced user, not even a developer, to start their journey to self-hosted freedom.

Disclaimer: Cloudron does not pay me. I wish it did. Nevertheless, if you are interested in signing up for their app after reading my story, please use this referral code: c1dcb8c0f6465a4e. Cheers!

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Sergey Melkumov
Small and Dangerous

Digital Nomad, Civil Servant, Researcher, Technology Enthusiast, Entrepreneur, Investor, Data Analyst, Blogger, Cat Lover.