and pay-as-you-go pricing. There are other advantages, too.
Support costs are low, as are maintenance costs. A SaaS
provider is able to deliver highly effective services from a
relatively lean infrastructure, and the end-user ultimately
benefits from these low operational costs. The need for
server support teams and excess capacity to handle spikes in
volume can be eliminated, and helpdesks are generally called
upon far less for SaaS products than their installed
counterparts.
SaaS products are, by their very nature, a cost effective
option for the end user. Organisations implementing SaaS do
of course pay subscription costs, but they avoid all other IT
costs related to software installations, maintaining licences,
and ongoing upgrade schedules. Hardware costs can also be
reduced or even eliminated, and valuable IT resource can be
channelled to more innovative tasks.
Organisations using SaaS can also plan more effectively for
growth. According to the Software & Information Industry
Association, this scalability
derives from the fact that “SaaS
applications grow with you as
your business grows.” With a
SaaS model, for example, users
can easily be added without the
need for new installations and
additional licences. Fewer
infrastructures are required to
support the new users. Fewer
training sessions are needed
when more users are added, and
fewer ancillary staff members are
needed to manage the additional
software seats.
Equally important, if software
needs to be scaled down, SaaS
offers that flexibility too without
financial loss associated with a
capital investment that can no
longer be used.
upgrades. And don’t forget that total cost of ownership must
form part of the overall ROI calculation.
The TCO of SaaS: What's Included?
The Software & Information Industry Association has
identified five costs when calculating the total cost of
ownership of a SaaS product.
1. Capital expenses – SaaS models often do not incur capital
expenditures (although some providers will charge setup
fees, particularly if data migration is involved). Most SaaS
models have a recurring cost structure that continues on a
monthly or annual basis for as long as you use the service.
There are no perpetual software licences to buy, and no
infrastructure to purchase.
2. Design and deployment costs – typically, SaaS software can
be deployed and put into production much faster.
3. Ongoing infrastructure costs – other than network
structure (ie internet bandwidth)
and software associated with
maximising bandwidth, there are
almost no incremental
infrastructure costs. There may be
some minimal client or desktop
software required, but the costs of
this are generally negligible.
It’s easy to see how
moving to a SaaS
culture can breathe
new life into an IT
budget, making it go
further and do more.
It’s easy to see how moving to a SaaS culture can breathe
new life into an IT budget, making it go further and do more.
THREE - ROI Calculation
Forrester Research has identified several key considerations
in determining the ROI of SaaS. They created its Total
Economic Impact (TEI) model to help companies consider
three fundamental aspects of SaaS ROI:
Benefits - How will your company benefit from SaaS?
Costs - How will your company pay, both in hard costs and
resources, for SaaS?
Risks – How do uncertainties change the total impact of SaaS
on your business?
When considering your own ROI analysis, be sure to include
all the cost, benefit, flexibility and risk elements associated
with implementation, deployment, staff, resources, and
4. Ongoing operations, training
and support costs – SaaS vendors
are responsible for the end-to-end
delivery of the application,
including operational support and
maintenance. Many SaaS vendors
offer ongoing training, often at no
additional cost.
5. Intangible costs – never easy to
calculate. They cover areas such as
reliability, availability, security,
scalability, capacity, and
opportunity costs.
A growing number of companies are moving to SaaS for their
fleet management solutions, and market research indicates
that this trend is set to continue.
The benefits are many. Maintenance, management and
support requirements are the responsibility of the provider;
hence the costs associated with those requirements are
either reduced or eliminated altogether. The IT resource
burden is eased and growth can be more effectively planned
and sustained. Vendor accountability, and ultimately
performance, is maximised.
These benefits make SaaS an attractive model for IT
departments facing the perpetual challenge of balancing
growing demands with strict budgets and limited resources.
Nonetheless, prudent organisations will continue to perform
the necessary ROI and TCO analysis. In an overwhelming
majority of cases, even after the most detailed of analysis,
SaaS continues to come out on top.
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