Thursday, February 21, 2013

On-Premise vs. SaaS ERP Software Costs

I would like to expand on the excellent article by Douglas Johnson,

He starts out with "The Cloud has inspired a new way of thinking about ERP software deployments, with companies having the option to purchase a license or obtain a SaaS solution." and would add that Platform as a Service(PaaS) in the Cloud has inspired a new way of thinking about custom and customized software of all kinds including ERP.

For Small Business he says, "So, for small businesses SaaS may offer better ROI."  We would add that most Small Businesses either don't have or cannot afford the IT staff needed to do customization. PaaS may offer a better ROI when custom or customized solutions are needed.

His calculations on SaaS are right on target.

He asks, "When is SaaS better?" and concludes, "Businesses benefit from SaaS when they cannot dedicate IT resources to installing and managing applications. We assumed upgrades occur two times per year and require approximately five hours to install. In addition, with SaaS expenses are deferred, so the model becomes more attractive as the cost of capital goes up.
The on-premise model contains the most upfront expenses as well as significant ongoing IT expenses paid over time. As the cost of capital increases, the upfront costs are not impacted, but the impact of the ongoing IT costs is reduced, so that the overall benefit is less than with SaaS."   We would add that a PaaS that has a Rapid Application Development tool that is fully integrated with the SaaS ERP solution, the cost of development and support is radically reduced compared to customization of Licensed (or even Open Source) ERP, improving the ROI even more.

In his conclusion he rightly says, "As your business changes, your business requirements change. Company size, IT expertise, legislation, risk, programming requirements, and other factors will influence your SaaS versus on-premise deployment over time. You should partner with a provider that offers a choice of license and SaaS deployments so you can switch your deployment if your requirements change."

In our conclusion we say, as your business changes, you business requirements change, and a PaaS to go along with your SaaS ERP will let you change and customize your solution easily and cost effectively.  Check us out at to see what we can do for you.

Mike Oliver Founder, Open 4 Business Online
Tel: +1(951)260-0793 | Mobile:*NEW 639479927462
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