Gartner: SaaS could cost more in the long term

Gartner: SaaS could cost more in the long term

Summary: The analyst house warns that although software-as-a-service is cheaper in the short term, total cost of ownership could turn out to be more expensive in the long run

TOPICS: Tech Industry

The benefits of software-as-a-service may not be as clear cut as they seem, with the focus on the initial savings hiding issues that could reduce its advantage over packaged software in the longer term.

One of the main issues identified by analyst house Gartner is that although software-as-a-service (SaaS) is cheaper in the short term due to the lower capital investment, total cost of ownership could turn out to be more expensive in the long run.

The main reason for this is that SaaS requires regular payments to the vendor by companies that use the software, as opposed to one-off payments for on-premise software.

Gartner vice president Robert Desisto said: "SaaS is an operating item which stays at a certain rate and never comes down."

And while upgrades on packaged software can push costs up again, in general the investment required becomes less each year, he said.

Desisto said the economic situation is undoubtedly boosting SaaS, with businesses having less money to invest: "There's a natural attraction to SaaS right now because of the fact that it's less expensive over the first few years, which quite frankly people are thinking of right now."

But Desisto said the fact SaaS has the potential to be more expensive in the long term is something businesses should be aware of.

Gartner also questions whether SaaS is faster to deploy than more conventional software, and argued the time to deploy both types of software is comparable once customisation, configuration and integration are taken into account.

"The real time that goes into deploying enterprise apps is not so much in the technical aspect but in the other elements of developing the data model, workflows, business process and integration — and with that kind of stuff you're not going to gain any advantage with SaaS," said Desisto.

Gartner suggests that despite SaaS vendors saying businesses only pay for the capacity they use, like utilities, in reality organisations normally have to sign up to contracts linked to the number of users rather than how often apps are used.

In terms of integration, Gartner says SaaS is similar to traditional software but is complicated by the fact it takes place outside the corporate firewall as well as bandwidth.

Topic: Tech Industry

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  • Issues Not Addressed by Gartner

    If you view it over the long term the failure to mention the upgrades to hardware and software on the premise must be taken into account. This was not mentioned and is one of the chief selling points to SaaS. The organization does not have to update the software or hardware like servers every 3 - 5 years. If you keep the software on premise these things would have to be updated every now and then over the LONG term. The other premise is most SaaS applications include technical support automatically. So now you don't have the IT staff that is needed to maintain and troubleshoot in house apps. In addition, they did not address the whole premise of actually doing the upgrade which could take several days each month. I know of one company that they use all in house application (BCBS) and they have one week devoted entirely to updating all the server patches and other software each month. That is 40 hours per week times each employee just to update OS, application, etc every month. With SaaS all you do is update a browser every now and then and your done. Another note that is not mentioned is that most SaaS companies can view a client's data very easily versus a desktop application where your support technicians are blind and relying on the comments by the end user. With SaaS I can go in and look right at what they are seeing. This cuts down on time on the phone for the end user and staff. My company does both types of software and I can clearly see the advantages of SaaS over a desktop application that runs from server on premise. In addition, there is one more aspect. Most organization don't have the funding to hire a full time VERY knowledge IT person to do all the fire walling and other items on site where as most SaaS companies have these people in abundance. So while some of the points are valid in the blog it fails to mention the obvious and unquestionable advantages that apps on premise have no answer for.