SaaS vs. On-Premise Software

SaaS vs. On-Premise Software 
What Makes More Sense for a Small Business?

Businesses are increasingly faced with the decision of buying software outright versus going with a SaaS (software as a service) program.  This is becoming the norm for all types of software, including accounting software, CRM, CAD, ERP and many others.

From a software standpoint, the SaaS programs are often more appealing because they are likely newer technology, they probably have much more modern and cleaner interfaces and often they have superior functionality.  Then you see the price, and you think, “wait, I have to pay a monthly (or annual) fee forever?” 

This is when you inevitably pull out the calculator and start doing some quick math.  What is the up-front cost?  How about a 5 year cost?  10 year cost? And on the surface, the price from the supplier of the old, on-premise solution seems to make a lot more sense.  

Now you start to rationalize. Does it really matter if the interface is a little dated? Do you really need a few of those bells and whistles?  Do you have to be able to use the software on a phone? After all, you are going to be saving a lot of money!  Or are you….?

This is where the emotional reaction to the prospect of a forever payment can skew the thought process of a decision maker.  Unfortunately, this happens way too often and businesses make what they think is a smart financial decision, but ultimately, they haven’t considered all of the hidden IT costs. 

IT costs can add up quickly, but SME businesses rarely sit down to see how much they’re spending. It can be surprising how much everything costs when you put it all together.
Some things to consider:
Server
Do you already have a server?  Servers can be a very large expense. Because they run 24/7, servers do periodically need to be replaced. The average lifespan of a server is about 5 years, so this expense would come up again.
Microsoft SQL Licenses
Depending on the type of software, you may need Microsoft SQL licenses. In this case, once you have the server, you still need to purchase the SQL license to be able to use it. 
Security and Virus Protection
Computer security and virus protection have become more and more important. After all, you need to protect your company information. You don’t want any malicious person to be able to access your data to ransom it, steal it, or delete it altogether. The cost of security is much less than how much it would cost to recover from getting hacked.
IT Labour Costs
In order to get the server, SQL licenses, and security set up correctly, you may need to have a professional do it. Once the environment is all configured properly, you will now need someone to install the software. This installation will not only have to take place on the server, but also every workstation that will run the software.  Don’t forget, you will likely have to install your own software updates, so there will be some work there as well. 
All of these processes can be complicated, and your business depends on getting them right. That being said, such critical labour does not come cheap!
Data Backups
The best software in the world is useless if your data disappears. So it’s even more critical to be sure this data is backed up frequently to ensure nothing is lost. A good data backup program is an absolute requirement. Just like the security program, this software becomes invaluable when you need it.
Conclusion
The total cost of everything listed above can vary depending on the size of your business but it is definitely a big number!  If you go with a SaaS product, none of these things are needed.  Your software vendor will host and maintain your software and data. You just need an internet connection. 

If you take all of these costs and add them to the initial software investment as well as the annual maintenance fees of up to 20%, the SaaS price probably doesn’t look so bad anymore!  This is before you even consider some of the obvious advantages of a SaaS program like lower up-front cost, peace of mind and the convenience of being able to access your software from anywhere, any time and on any device.

In 2020 and beyond, more and more software companies are going the route of a SaaS model and when you add the numbers up, this isn’t necessarily a bad thing.

WMSSoft have solutions for Job Shops, Manufacturing, Distribution and more, all cloud based SaaS products all taking the IT pain and indirect costs out of the solution leaving more time and $ to run your business.