In today’s rBlog post, we continue our discussion on software total cost of ownership (TCO), and whether it makes more sense financially to subscribe to a SaaS solution or purchase on-premise software, as well as all the factors that should be considered when analyzing software TCO.
Factors: Integration, Scalability and Operability
Your company likely operates using a range of software: bookkeeping, marketing, databases, and property/facilities management, perhaps. You need these separate software platforms to integrate efficiently and to update as each platform comes out with revised versions. Likewise, you may need to add hardware and network infrastructure as you scale up your operations, a process that can lead to significant downtime and diminished performance.
If your software is in-house, the task of integrating separate software platforms and updating to the latest version is up to your IT crew. They will also be tasked with adding more hardware and expanding your network. And in the event of operability disasters – a system crash or facility damage by fire, flooding or storm – your IT department is your only defense.
Integration, scalability and operability are built into your SaaS subscription. Your SaaS provider supplies integrations and APIs for a wide range of software integrations – they must, in order to serve a broad base of customers. Likewise, SaaS providers update interfaces immediately; your enterprise will see little to no disruption to operations. If your organization is beset by a natural disaster, you’re covered: your software is off-site and ready for use via laptops and mobile devices, until the day you are back in the office.
“These days no enterprise system operates in isolation; they require interfaces to other systems in the organization.”7
–Chris Doig, CEO, Wayferry
7 https://www.cio.com/article/3005705/software/calculating-the-total-cost-of-ownership-for-enterprise-software.html 8
- If your company remains small and you have a first-class IT department, you should be fine. Otherwise, a SaaS solution resolves integration and scalability easily and at a low cost.
Factors: Deployment and Training
All software, whether on-premise or SaaS, goes through a vetting process. The time expended on deploying and training are significant elements in Total Cost of Ownership.
For on-premise software, deployment includes testing existing systems for compatibility with the new software, pre-launch training and post-launch testing. Depending on your organization, deployment may require adding a new server room. For training, on-premise software companies typically offer initial train-your-IT-team sessions. After launch, your IT team is expected to train users, or pay for additional training consults. As on-premise software adds features or your company adds new hires, these third-party training fees can add up.
SaaS software has the same deployment vetting processes, but users can start using SaaS services the same day they sign up. Since many SaaS platforms offer training and host support online as part of their subscription packages, users can get up to speed when it fits their schedule and their preferences: SaaS providers offer an online Knowledge Base, chat, email and phone support, typically at no additional expense.
“In almost every case in our experience, implementation of a new system causes a short-term dip in efficiency as users get used to working in the new environment.”
– Will Nourse, Director for Cloud Solutions, Cloud for Good
- SaaS software wins: costs of deployment and training are included in the subscription price, and follow-up support is user-friendly.
Just like commercial properties, software needs regular maintenance, from patches and upgrades to enhancements like cache cleaning and speed optimization. If you have on-premise software, these maintenance chores are probably handled by your IT team on an on-going basis.
If so, any true and accurate TCO analysis should include a portion of your IT team’s salaries that reflects the amount of time they spend supporting the software. IT staff salaries are generally a fairly significant but often overlooked component of TCO. Remember too that the older your software gets, the more support it will require from your IT team, which increases expenses for maintenance.
With SaaS, maintenance is included in the subscription. SaaS providers handle end-to-end delivery of patches, upgrades and back-ups to prevent downtime. The process is automatic, meaning your staff always work with the most current software version and a secure platform.
“On-going maintenance is critical to the reliability, security and usability of any software application. Software that isn’t properly maintained will quickly lose its value to end users and worse, potentially compromise a client’s data. With on-premise software, the client is responsible for updating and maintaining the software, which is labor-intensive and becomes quite expensive over time. With SaaS software, however, the SaaS provider is responsible for maintenance and updates and the cost is included in the subscription.”
–John Brosnan, Chief Operating Officer & Co-Founder, rSquared CRE
SaaS, by a wide margin. With SaaS, your software provider is responsible for maintenance and the cost is included in your subscription. With on-premise software, your organization’s IT department is responsible for maintenance, so you bear the burden of all the expenses, including a portion of the team’s salaries, which can be a very sizeable expense.
So, two rBlog posts on software TCO down, one more to go. Our next post will be the third and final installment on the topic. In it we’ll discuss the last three critical components of any true TCO analysis. After that, you should be well-equipped to conduct your own TCO analysis to help you choose the software that’s best for your organization.
Meanwhile, if you’d like read more on the subject, download our free white paper on Saas vs On-Premise software TCO. You’ll be surprised at all the costs and factors that should be considered when making an educated and informed decision.