On-premises software (sometimes abbreviated as "on-prem") is installed and runs on computers on the premises (in the building) of the person or organization using the software, rather than at a remote facility such as a server farm or cloud. On-premises software is sometimes referred to as “shrinkwrap” software, and off-premises software is commonly called “software as a service” ("SaaS") or “cloud computing”. A driver for moving away from on-premises to co-location was the need to provide web servers. With the massive growth of the web around 2000, even companies with a strong background in on-premises hosting found themselves needing to also use co-located web servers in remote data centers, in order to achieve the necessary connectivity. The on-premises approach to deploying and using business software was the most common until around 2005, when software running at a remote location became widely available and adopted. The new, alternative deployment and use model typically uses the internet to remove the need for the user to install any software on premises and had other accompanying benefits: running software remotely can result in considerable cost savings because of reduced staffing, maintenance, power consumption, and other factors.

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