Cost Comparison: On-premise Software vs. SaaS

If you are stuck considering between a Software as a Service versus a traditional on-premise software application, then you should take into fact these some key factors to keep in mind when calculating TCO and ROI. SaaS solutions will represent the best value in terms of true TCO. Both the software providers and customers will benefit the most from the cloud’s economic model.

This is a comparison of a traditional software package versus a SaaS solution over a 3-year period.

On-premise application:

• License fee: $10,000 for 5 users
• 20% maintenance fee per year (usually $6,000)
• Bottom line/Total cost over 3 yrs: $16,000

SaaS application:

• Flat month fee per used: $100/month or $1,200/yr
• 5 users per year: $6,000/yr
• Bottom line/Total cost over 3 yrs: $18,000

It looks like the SaaS application is more costlier to the customer but do not stop the numbers there! Take in consideration the overall expenditures such as maintenance and upgrades.

The cost for having an on-premise application add up with items such as:

• Equipment/proper hardware
• Post-installation upgrades and patches

A SaaS solution will have these costs covered by the service provider leaving the user with only a flat, monthly usage fee.