SaaS Implementation: 5 Hidden Costs of Deploying SaaS Applications

Hidden costs are never fully hidden. Careful planning and engagement between Line of Business, operations and IT from the onset can help anticipate and manage most of the associated deployment costs.

The SaaS (Software-as-a-service) model proposes access to software services that deploys easily, quickly and efficiently. Deployment refers to the time it takes to install, integrate, and use a new software or service after it’s purchased.

Compared to on premise traditional systems, SaaS deployment can be cheaper in the long to medium term. Implementation costs can be lower than while infrastructure costs can be down to 0% since the SaaS vendor handles most of the back-end operations such as managing data centers and hosting.

How then can these hidden costs of SaaS uncovered?

1.       Investigate the cost of deploying new SaaS with pre-existing on premise systems

In most instances, clients already have some on premise system in use. They may however decide to purchase a SaaS application to improve their efficiency and productivity. Left unchecked, differences in input formats could present information integration challenges, increasing deployment time and cost.

The associated data migration costs depend to a large extent on compatibility of existing systems as well as the required new system interfaces. If implementation is conducted by the SaaS vendor, it could be expensive since it may take them time to understand the in-house system.

The SaaS vendor sometimes handles technical integration issues but at an additional cost to the client. It could be more cost and time effective to contract a third party to manage the integration process. It may also be helpful if the client were to identify the specific differences in the two systems, such as data migration costs, and establish whether it is worth integrating these functions or using another SaaS provider with better compatibility.

2.      Establish the cost of training staff to use the SaaS applications

The client purchasing the SaaS application may charge extra to train the client’s team and ensure they are comfortable handling the system. SaaS vendors could additionally bill the client for configuring and setting up the services. These charges may have been excluded from the initial subscription cost.

The vendor may also charge the SaaS client additional fees for technical support services. It’s extremely important that the client understands the service level agreement to know the instances when additional services costs extra.

3.      When clients are paying more than they should for the SaaS

SaaS vendors provide flexible payment options reducing the massive upfront costs charged by traditional on premise software vendors. However, once an on premise software has been acquired, annual maintenance costs are lower than SaaS subscription fees in the medium to long term.

Subscription payments for SaaS applications can be made monthly, quarterly or annually. Although the monthly subscription payment plan may appear cheaper, it could be up to 15% higher than the annual subscription. If the client intends to use the software for a long time and has a budget to pay annually, it would be more cost effective to choose the annual payment option.

4.      When expansion of SaaS users grows unchecked

Pay-as-you-go plans may keep the clients initial costs low and easily scalable but they can lead to increased hidden costs if access and utilization is not monitored. Under or over provisioning of SaaS applications, especially those that charge on a per user/storage basis, can lead to increased costs against the allocated budget.

Additionally, clients may also be charged for accessing the software from additional devices such as mobile devices. Per user based applications can also be expensive if economies of scale are not reached. The SaaS client must be diligent to ensure necessary access controls are monitored. The client must also ensure what they have budgeted in the plan is used efficiently without upgrading to top tier plans.

5.      Not being aware of exit costs

The final hidden costs may be encountered when terminating SaaS services. If a client stops using the SaaS application halfway through the contract, some SaaS vendors may charge a penalty or withhold excess fees that had been remitted. The SaaS client could also incur additional costs in trying to obtain their own data secured on the SaaS provider servers. It is important to review SaaS vendor’s terms and conditions to know the costs that may be incurred in the course of terminating use the SaaS application.

Proper monitoring and planning will ensure that there are no surprises during billing. Service Level Agreements should articulate the service expectations of the vendor; that way the client is aware of the details of the agreement. This will ensure smooth relations between the client and the vendor. The IT departments should be involved in the process so as to ensure data security is not compromised. This could lead to additional data recovery costs.