We've cruised Alaska twice, once in an inside, and once in a balcony. The trip on the inside was fine, and I don't regret taking it. That said, I'm not sure I would have been outside when scenic cruising on our second (balcony) one when the most amazing rainbow appeared, and we were able to watch it a long time sitting on our balcony. We may or may not have seen it, or had seats to comfortably watch it, if we had an inside.
Need a balcony? No. But I recommend it.