SaaS vs On-Premise Cost Analysis: Choosing a Software

August 7, 2015

Category: Best Practices

Choosing a technology for your company is not an easy task, nor is it a simple decision, nor a quick fix. Your decision can affect your company for years to come. While there are many considerations, cost savings should always come to mind.

Here are some things to keep in mind when doing a SaaS vs On-Premise Cost Analyst:

When it comes to software, many companies debate between on-premise software and software as a service. If you’re worried about the initial investment of a piece of new technology, it may make sense to consider a SaaS platform.

When software is purchased as a service, the software company creates a software product and hosts that product on multiple servers.

The vendor bears the cost of managing the hardware and software infrastructure required to host the software.  The customer is getting the right to use the software for as long as they pay their subscription fees.  Also, typically all major and minor updates to the software and all support is included in the subscription fees.

Additional advantages of a SaaS platform include:

  • Predictable: There is less unpredictability when it comes to SaaS because of the fact that you don’t need to host the platform.
  • Scalable: It’s easier to upgrade the system, allowing it to grow with you as your business grows.
  • Usage-based pricing: This type of pricing model often accompanies SaaS technologies, allowing you to consume as much as you need of the product, scaling up or down as you go.
  • No wasted money on infrastructure or support

Generally, purchasing software as a product (a.k.a. on-premise technologies) involves large capital expenditures to get started.

The customer is required to purchase and maintain the infrastructure required to host, manage, and maintain the application.

Some of the additional expenses required when purchase software as a product include:

  • Software license (right to use the software) based on metrics like the number of servers you want to run it on
  • Annual software maintenance fees
  • Servers
  • Storage
  • Internet Connectivity
  • Security setup and maintenance (if you are purchasing an eCommerce system, you may need to be PCI compliant and there are many additional costs associated with PCI compliance)
  • System backup
  • Administrative services including server management, applying updates to hardware/software, data center costs, etc.
  • Additional costs for upgrades/new releases

Make sure you consider how your business will be able to handle these types of costs and payment plans in selecting the B2B eCommerce solution that’s right for you.