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ShareTCO Analysis: Software as a Service
Posted by Andrew Conry Murray on March 2, 2007
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Software as a service costs up to $135,000 less than a comparable licensed application over three years. That's the finding of Network Computing'S TCO analysis contrasting a CRM service and a licensed software package. Of course, the bottom line doesn't tell the whole story: Readers cite concerns over security, performance, uptime and physical possession of critical business data. By jumping into SaaS, is IT just trading one set of problems for another?
Maybe, but the savings might be well worth the extra due diligence. Our detailed breakdown compares the costs to acquire and deploy three CRM applications. On the SaaS side, we looked at Salesforce.com Professional. For licensed premises software, we examined Microsoft Dynamics CRM 3.0 Professional and Oracle Siebel CRM Pro. In our evaluation, for 105 users over the long term, when it comes to price, SaaS offers a significant advantage over the premises products.
How did we come up with our numbers? Not by simply regurgitating marketing white papers or analyst-driven studies. Rather, we costed out a fictional midsize company, HealthPlex Software, using data from four sources (see "How We Calculated"). We also enlisted the help of a seasoned software integrator, Bluewolf Group, that helps companies deploy SaaS and premises software applications. With more than 1,000 SaaS deployments under its belt, Bluewolf helped give us the deep dive on what it really takes to roll out a service-based application. We backed all that up with hands-on research and an in-depth survey of 366 IT professionals across the country.
In summary, both the capital costs to deploy a licensed CRM app, and the maintenance costs to keep it running, are significantly higher than for a service. In the first year of deployment, a licensed CRM package for 105 users will cost $140,000 to $170,000 more than the service. Over three years, the price gap is $95,000 to $135,000.
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