On-Premise Vs SaaS: Understanding Total Cost of Ownership

In this tech-savvy day and age, business owners have a lot of options for software. As someone managing your business’s budget, you must weigh your options so that whatever you select won’t end up costing you more over time. As an example, customer relationship management (CRM) software comes in a variety of sizes and shapes and is almost guaranteed to be a necessity for small businesses. You need to be able to have the flexibility in whichever software program you select to reach your customers in the way that feels most comfortable to you. Luckily, Software Advice, a leading software comparison resource, offers a great tool called the TCO calculator that can help you do some cost analysis when it comes to selecting the right software that won’t break the bank.

One of the biggest options in software choices is whether you want to have an on-premise software (often shortened to on-prem) or a software as a service (SaaS.) On-prem software is just that, it’s on your premises. This means that you usually pay an upfront fee to own the software in perpetuity. SaaS means that you usually pay a subscription fee in order to utilize the software, whether it be online or not. The calculator also breaks down some other differences between the two:

• Set-Up--While there is no true set-up or installation with SaaS, there can be a considerable amount of time and money invested in the installation of on-premise software. You will also spend more on hardware with on-premise software, and will often pay again for any updates down the road. SaaS updates are spread out over the course of use, and typically come as part of the subscription with no extra cost.

• Customization--In this category, on-premise software has generally taken the lead in giving buyers the option to customize software to their specifications. However, some SaaS companies have taken notice and begun to add in more developer tools for small business flexibility. The issue with either is that the more customization you have in your software, the more likely it is that you will be paying for additional upgrades.

• Data, Data, Data--This one is a draw, as with either system you will generally have to invest the same amount of time and money in moving your data to the new system. This cost obviously increases if you were using an outmoded system like spreadsheets, which takes more time.

• Training--When it comes to new software, there will always be a learning curve. Either way, companies will have to offer training for their employees in order to utilize the software to its full extent. This might be slightly cheaper with SaaS because they typically utilize online training options, and often have some form of free training. It really just depends on your needs though.

• Support--The cost of support is generally much less with SaaS, since their support is generally online and included in the subscription price (watch for this). In addition, with on-premise software, you might also have to pay for on-premise IT support to make sure that the software is working properly.

When using the cost of ownership calculator, be sure to accurately input all of the costs associated with your software choices. The tool’s developers have also given the option of adding in additional costs that may be a must for you, like future developer tools. As a small business owner, you need to make the right decision for you. This tool tries to make that decision a little easier.

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