Consider Cloud. Go for SaaS.

SaaS will far outpace market growth. This is especially true for front-office applications, where flexibility and innovation are critical.

While total economics are a major consideration in the decision, there are several other tangible and intangible factors organizations should consider when embarking on a software purchase decision.

Total cost of ownership:

When evaluating a purchase decision, many companies compare the price of on premise software with the regular cost of a SaaS subscription. While these numbers matter, they fail to capture the total cost of ownership. On-premise solutions require not only the purchase of the software, but also require support costs that are typically 18 to 20 percent of the license as well as additional hardware, personnel for maintenance and support, network monitoring, management tools and so on. In the SaaS model, many of the costs listed above are included in the subscription cost, which not only leads to a lower total cost of ownership, but also reduces complexity and overhead.

Resource costs:

Gartner estimates that the annual cost of owning and managing software applications can be as much as four times the cost of the initial purchase. In fact, companies can spend up to 75 percent of their total IT budget just to maintain and run existing systems and infrastructure. With cloud-based applications, the internal resource costs are minimized, further adding to their economic advantage.

Time to value and ease of implementation:

On-premise software implementation can take a year or more, and as circumstances change, priorities, resources and budget can shift, often delaying or forever stalling these time-intensive, IT projects. SaaS deployments, depending on the complexity of the solution, usually only take couple of months, but some can be live in as little 30 days. This ensures that value realization is as swift as possible and lowers the overall deployment risk. SaaS applications require less coding, are simple to scale as your business needs transformation, are easily configurable, and have more elastic integration options.

Access to innovation:

Once you buy on premise software, the technology immediately begins to age. Getting the latest improvement requires a time-intensive and expensive upgrading and is typically not available for at least a year. Consider how you feel when the newest version of the iPhone is released and you just purchased the previous version 6 months before. Wouldn’t you rather have the latest and greatest innovation as soon as it’s available and avoid a lengthy and expensive upgrade process? The beauty of SaaS is that you will always be on the most recent version, with immediate access to new capabilities and features as they become available. Your subscription actually grows over time, giving you even more value.

Ability to try before you buy:

When it comes to software, many companies make purchase decisions without a good understanding of the value the software will deliver to their business. They make a large up-front investment in the form of a capital expenditure, without test driving the system first —a risky move for such a large, high-profile expense. Most SaaS applications enable companies to test or pilot the application first, to ensure there is business value in the application.

Ongoing vendor responsibility and commitment:

On-premise software vendors get large up-front license fees, recognizing the full value of your purchase on day one. After deployment, it becomes your responsibility to uphold the software going forward. On the other hand, SaaS vendors are financially motivated to ensure your ongoing success. Their entire business model of recurring revenue is dependent upon your satisfaction and usage.

In today’s world, timing is of the core, and many companies cannot wait several months for expensive and time-intensive deployments, or make large cash outlays in recessionary times. In order to make better business decisions, they need access to the latest innovations immediately.

Ultimately, the cloud simplifies hosting and enables applications to scale up and down as customers’ business needs change, and support distributed users.

Better decisions require the best model. So, ask yourself: Is a SaaS model the answer for your business?