What is a Hosted Service? A Comprehensive Guide to On-Premise vs. Cloud-Based Hosting

Imagine you had access to a business partner who excels at everything tech-related. They can handle all the technical heavy lifting, letting you focus entirely on growing your business. That’s the offering a hosted service provides.

At its core, a hosted service is support and infrastructure provided by a company over a network. These services can be almost anything—from simple email hosting to full access to complex application environments—it depends on what you need. The beauty of hosted services lies in their flexibility. What started as a service that could only work through offering physical server space has evolved into cloud computing options with greater flexibility and lower cost.

Hosted Services vs. Cloud-Based Services

While these terms might sound interchangeable, they’re not. Traditional hosted services rely on physical servers in a specific location, whereas cloud-based services are entirely virtualized. They are also distributed across multiple servers in data centers.

Think of it like this: traditional hosting is like owning a house, while cloud hosting is more like a voucher or pass to stay in hotel rooms around the globe at will, with different sizes and amenities depending on your changing needs.

Understanding Hosted Services

Hosted services mean using a third-party provider to manage anything from hardware, software, and networking—either on their premises or through cloud infrastructure. Their ultimate goal? To simplify your use of technology and free your team to concentrate on its core business objectives.

Types of Hosted Services

Non-Cloud Hosted Services

Non-cloud hosted services, also known as traditional hosting, include options such as website hosting, managed servers, and dedicated server environments. Companies lease or own physical servers housed in secure data centers.

The advantage of this approach is that it offers maximum control, making it ideal for organizations that require strict regulatory compliance or prefer direct oversight of their technology infrastructure.

For instance, financial institutions and healthcare providers often opt for traditional hosting to ensure they meet data protection standards, have complete control, and can take responsibility for the sensitive information they handle.

Cloud-Based Hosted Services

Cloud-based hosting is more recent and has transformed how businesses manage IT. It is available in several models, each designed to address specific business needs:

• Software as a Service (SaaS): SaaS delivers software over the internet, meaning you don’t have to do local installation and maintenance. Examples of this include Salesforce and Google Workspace.
• Platform as a Service (PaaS): PaaS offers a cloud-based environment for developing and deploying applications without managing the infrastructure yourself. Examples include Microsoft Azure App Services and Google App Engine, allowing faster development.
• Infrastructure as a Service (IaaS): IaaS provides virtualized computing resources like virtual machines and storage over the internet. Providers such as AWS and Microsoft Azure allow businesses to facilitate scale resources.

Cloud-based hosting is accessible online, enabling businesses to scale resources in real-time. Whether dealing with increased web traffic or launching new services, cloud solutions allow you to adjust quickly to changing business needs. 

Key Benefits of Hosted Services

• Cost-Effective Solutions: Hosted services help lower technology costs by reducing upfront hardware investments and offering pay-as-you-go pricing. Resulting in significant savings on infrastructure, staffing, and maintenance.
• Scalability and Flexibility: Cloud services allow businesses to instantly adjust resources based on demand, providing a highly scalable solution compared to the slower and more expensive scaling of traditional hosting.
• Maintenance and Support: Service providers manage all technical maintenance, from hardware to security updates, allowing businesses to focus on their strategic planning instead of IT issues.

Common Use Cases for Both Hosted and Cloud Services

Non-Cloud Use Cases

Industries with stringent compliance requirements—like healthcare and finance—often still go for traditional hosting. The reasons for this are:

• Enhanced data control
• Adherence to industry-specific regulations
• Support for legacy systems

Cloud Use Cases

Cloud services are best when you need both agility and cost-efficiency:

• Startups benefiting from flexible, low-commitment infrastructure
• E-commerce platforms managing seasonal traffic fluctuations
• Modern software development requires seamless tool integration

Key Considerations When Choosing a Hosted Service Provider

Selecting a hosted service provider it’s about matching your needs to what a provider can offer. Here are some key considerations for how to do that:

• Control Requirements: Traditional hosting offers absolute server control, ideal for organizations that need to manage their hardware and security. This control is particularly beneficial for companies that store sensitive information. Cloud-based hosting handles the information itself. Reducing direct oversight needs but loosening data privacy.
• Budget Constraints: Traditional hosting requires significant upfront costs and maintenance, while cloud hosting uses a subscription or pay-as-you-go model. Cloud solutions are often more cost-effective for businesses with fluctuating needs.
• Security Needs: Traditional hosting allows strict data control and is necessary for industries with rigorous compliance needs. Cloud-based providers include built-in security protocols and certifications, but these can’t be precisely specified.
• Scalability Expectations: Cloud hosting can swiftly scale resources, which is very helpful for dynamic workloads. Traditional hosting requires manual upgrades, which can be costly and time-consuming.

Conclusion

Hosted services represent a spectrum of technological solutions—from physical servers to fully virtualized environments. The fundamental trade-off is between control and flexibility.

Your ideal solution isn’t about choosing the most advanced technology, but it’s about selecting the approach that best aligns with your business’s current operations and future growth strategy.