by: Anne Kilgour
There have been a few stories in the news this year about software companies like Microsoft and Adobe moving their software to being a subscription only model. My first thought on reading this was that these companies are trying to tie me in to paying them forever and ultimately costing me a lot more money. But is that really the case?
If you have ever looked into purchasing cloud based software (also known as SaaS – Software as a Service), you might be surprised by the monthly subscription fees. Some quick mental arithmetic will tell you that paying $2,000 per month for all your users adds up to $24,000 annually. If you are comparing this to the cost of buying traditional licences for $50,000, you might think that the subscription model is going to be much more expensive. After all you are going to keep that new system for more than 2 years, right?
It is easy to overlook all the other costs that come with a traditional, on premise, solution. The most obvious one is the hardware – you don’t need to buy or use any servers when you adopt an on-demand solution. The cost of buying servers is of course a part of this – but even if you already have them available, you still have to house them in an appropriate environment, back them up regularly, preferably to another physical location, provide power etc., and have someone monitor, maintain and fix them when necessary. Of course, that all comes at a cost.
Then there is also the software side – that solution that you have bought and implemented doesn’t stand still. Who will investigate and fix any bugs that you uncover? How often will you upgrade to a newer version? Who will install the PC portion of the system for new users? How easy is this to do?
This is of course where the SaaS model earns its bread and butter. All the server management is done for you, in state of the art facilities, with the highest levels of security, back up and redundancy to ensure you have the maximum availability of your system. On the software side, you have access to experts to help you with any bugs or problems at no additional cost. The system is regularly upgraded for you, and there is no PC software to install. In fact this in itself is one of the biggest advantages of the cloud – you can truly access your system on demand, from any device, anywhere, anytime, so long as you are connected to the internet. On the beach, in the office, on the train home, wherever you have connectivity you can be working on your system.
I recently found a great tool to help you compare the total cost of ownership (TCO) of an on premise system and an on-demand, SaaS system, from the very helpful people at Nucleus Research. Through putting in a few figures for the costs of running your system locally or in the cloud, it will quickly analyse the TCO and present you with a clear comparison of the two options.
Here is an example of the comparison output:
So, if your senior management are nervous about moving to the cloud, show them the potential savings you could achieve. Then speak to Ouest to find out more about making your business a Best Run Business with SAP Business ByDesign.