If you are still fostering the belief that loyalty programs are exclusively reserved for customers only, you need to change your thought process immediately. If you’re in a B2B ecosystem, your key focus is channel partners, distributors, and last-mile advocates and how to retain their loyalty.
Channel partner loyalty programs are thus the backbone of the success of your business, driving your sales, pushing your products in the market and ultimately driving your business’ revenue simultaneously.
With a robust loyalty management platform like 1Channel’s, you get to keep your channel partners engaged, motivated, and loyal to your brand. Now, the big question is: should you go for a cloud-based LMS or an on-premise one? Let us break down all the details in this guide.
What is the Fundamental Difference Between Cloud and On-Premise LMS?
To better understand the concept of cloud and on-premise LMS, let us take an example and break things down.
Consider that you have just shifted to a new home and you are setting up your home entertainment system in your living room. There are two options that your partner has provided you:
- Buy DVDs and a fancy home theatre setup (on-premise)
- Subscribe to Netflix or Prime Video (cloud-based)
With DVDs, you own everything, but you’re responsible for maintenance, storage, and upgrades. On the other hand, with Netflix, you get instant access to an ever-growing content library without the headache of maintenance. The same logic applies to loyalty management systems.
To better explain things, here’s a breakdown of difference between on-premise LMS and cloud-based LMS:
- On-premise LMS or the one-time software is hosted on your company’s servers, offering full control but requiring huge upfront investment, IT maintenance, and security measures.
- Cloud-based LMS, on the other hand, is hosted on a provider’s cloud infrastructure, making it scalable, cost-effective, and easy to manage.
So, if you want agility, minimal IT hassles and optimal scalability, cloud-based loyalty management software is your best bet. On the flip side, if you want 100% control over the loyalty software and can afford the ongoing maintenance and costs, on-premise LMS is a better choice for your business.
Which One Will Save Your More Time and Effort?
With how competitive the B2B business landscape is, it isn’t surprising that there are a lot of factors at stake. Every minute, you have the chance of getting overridden by a competitor, owing to their products, services or even the kind of loyalty management they are offering to their channel partners.
So, if you want to stay ahead in this otherwise competitive market, the key is to find tools and software that truly push your business ahead. The same applies to your loyalty management software too.
Think of it this way, when you are choosing an on-premise system, it is like cooking everything from scratch. You’d need to chop everything, prep the ingredients, cook the food and then serve it too.
Cloud-based LMS, on the flip side, is like hiring a catering service where you get to enjoy the process while the software provided (aka 1Channel) take care of everything. With the extra time you have in your hand, you can delegate that to scaling your business and bringing it on par or better than your competitors.
On-Premise LMS:
- Requires a dedicated IT team to set up and maintain servers.
- Takes months to implement, with potential delays.
- Needs expensive hardware and infrastructure investments.
Cloud-Based LMS:
- Can be set up in weeks (or even days!).
- No infrastructure investment—just sign up and get started.
- Maintenance and updates are handled by the provider.
Again, if you are looking for something quick and hassle-free, cloud-based loyalty management system is the way to go. However, if you can afford to spend more time and efforts into setting up the loyalty platform and the channel partner loyalty program, consider the alternative.
What is the Cost Factor Between On-Premise and Cloud-Based Loyalty Management Software?
Another major point of difference between on-premise and cloud-based loyalty management software is with the cost you have to incur.
Its as simple and similar as buying a home. Would you prefer buying a home with an upfront onetime investment or would you consider a recurring monthly payment for the same home?
You might think that the “recurring monthly” costs associated with a cloud-based loyalty management tool would add up to be a lot. However, you also need to keep in mind that you don’t have to worry about the huge upfront cost that you need to pay for an on-premise LMS.
On-Premise LMS:
- Huge upfront costs (hardware, licenses, IT infrastructure).
- Recurring costs for IT staff, security, and maintenance.
- Limited scalability—upgrades require more investment.
Cloud-Based LMS:
- Pay-as-you-go model (monthly or yearly subscription).
- No hefty upfront investment.
- Easily scalable—upgrade or downgrade based on business needs.
If you don’t have the capital for a huge one-time payment, followed by ongoing maintenance costs, cloud-based LMS is your best bet. On-premise is only viable if you have deep pockets and don’t mind long-term fixed costs.
Which One is Better for Security and Compliance?
In the B2B environment, security is hands down one of the most important factors driving the business’ success (and downfall). Since you are dealing with sensitive partner data, transactions, and reward programs, wanting robust security and compliance with your loyalty management platform is a necessity.
However, one of the biggest myths is thinking that on-premise is “always” safer than a cloud-based LMS.
On-Premise LMS:
- Complete control over security, but requires dedicated resources to manage threats.
- If your system gets hacked or crashes, it’s entirely your problem.
- Compliance depends on your IT team’s expertise.
Cloud-Based LMS:
- Leading cloud providers invest heavily in security (firewalls, encryption, compliance).
- Automatic backups and disaster recovery.
- Compliance is handled by certified providers (ISO, GDPR, etc.).
At the end of the day, we’d recommend cloud-based rewards management software since it offers better security and compliance without extra headaches.
Which Type of Loyalty Management Tool Grows with Your Business?
If your loyalty management platform doesn’t scale with your business, it is bound to restrict your channel partner growth and loyalty.
This explains why on-premise LMS is usually a lot more restrictive than cloud-based ones. If you want a future-proof solution that will not tangle the growth of your business, cloud-based LMS like 1Channel’s is your best option.
On-Premise LMS:
- Scaling requires hardware upgrades and server expansion.
- Performance depends on your local IT infrastructure.
- Harder to integrate with modern tools like AI-driven analytics and mobile platforms.
Cloud-Based LMS:
- Scales instantly without major investments.
- Performance is managed by the provider—no downtime, no slow servers.
- Easily integrates with third-party tools, analytics, and mobile apps.
Which One Provides Better Customisation?
If you want assured success of your channel partner loyalty programs, customisation is the key. In fact, around 71% of the loyalty programs fail because of the standarised approach.
So, which of the two, on-premise and cloud-based LMS, provides better customisation? The answer is tricky, to be honest because both of these platforms offer amazing customisation abilities.
However, the biggest issue comes with the efforts you have to put in to enjoy those features.
On-Premise LMS:
- Highly customizable but requires in-house developers.
- Complex integrations may take months.
- Updates and changes depend on IT bandwidth.
Cloud-Based LMS:
- Pre-built integrations with popular CRMs, ERPs, and analytics tools.
- Easy customization via API-based architecture.
- Automatic updates ensure your system is always up-to-date.
We do have a clear winner even in this aspect too. Cloud-based LMS is perfect for businesses that want quick and prompt customisation without any limitations.
1Channel LMS: The Perfect Fit for Every Business
If you’re managing channel partners, distributors, and last-mile advocates, your loyalty management platform needs to be scalable, efficient, and easy to use. Enter 1Channel.
With our robust and comprehensive cloud-based loyalty management system, your business gets to experience the best of loyalty programs that yield the expected return on investment. You can throw away your worries and let your team take care of all your channel partner loyalty needs while you focus on growing your business.
So, are you ready to make the shift? If you’re still unsure, let’s talk—1Channel has helped businesses like yours design and implement powerful cloud-based loyalty management solutions!
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