On premise software or SaaS, that is the question. Many companies will do an easy comparison. They will compare between the hardware, permanent licensing costs, and maintenance of on premise solutions, versus the monthly or periodic fees associated with software subscription.
It is a common assumption to think that over a two or three-year period, the premise is a cheaper option. This is a mistake, since they are not taking into account all of the many costs – both apparent and hidden costs of on premise software, which you will not find on SaaS, or in the odd case where these costs are found, they are a fraction of the costs of on premise solution.
- It is important that you compare the total cost of ownership (TCO). Let’s have a look at the true costs of on premise software.
- The selection process takes a great deal of time and effort. This process includes the selection of a software solution or application. Often you also need to select a hardware vendor and model, as well as the database and the operating system. With SaaS, you don’t need to worry about the operating system or the database. You simply need the software/application to work for your business.
- You need to consider the true maintenance cost of the software, hardware, as well as the underlying software that you have installed your applications, your backup solution, and any other related costs.
- The cost of small upgrades and patches including installation and testing.
- Operating costs, which include testing, backup and restore, increasing storage, replacing storage devices, upgrading firmware, doing system copies, cluster or fail over tests, etc.
- Big release upgrades, which can occur often or rarely. These upgraded include the cost of the upgrade where applicable, installation and testing costs.
- SaaS has no technical implementation, testing, or installation, which instantly saves you 24% to 35% on implementation costs. In addition, most SaaS vendors are based on best practices, modern implementation, and personalization technologies, which eliminate the high cost of classical customization of most on premise solutions.
- It is generally harder to integrate on premise solutions with web servers or other online applications. This is generally harder than what occurs on platforms that are web service and cloud service ready.
- Training costs for on premise software are almost always more costly as the levels of integration are more in-depth and the number of people that require training, where asSaaS requires only minimal training to learn to use.
- Adaptability and scalability costs.
- Security costs are associated with on premise software or applications, where as those costs are not present with SaaS applications.
- Recent studies from a number of prestigious market analysts like IDC show that TCO of SaaS is 35% to 45% lower over a period of 7 years than comparable on premise software.
- The cost of software on premise has a number of obvious costs along with other hidden costs that you should not overlook when you are considering business software.