To move to the cloud or not? It’s quickly becoming one of the biggest questions facing small businesses today. Especially since the rise of companies offering cloud based solutions , more and more organizations are reevaluating whether or not to buy on-premise software or subscribe to Software-as-a-Service (SaaS).
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. Here are six reasons why companies should move to the cloud and consider running their software as a service:
- Total cost of ownership: When evaluating a purchase decision, many companies compare the price of on-premise software with the recurring 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 more. 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 days, weeks or even months, and as circumstances change, priorities, resources and budget can shift, often delaying or indefinitely stalling these time-intensive, IT projects. SaaS deployments, depending on the complexity of the solution, are usually quicker to implement. This ensures that value realization is as rapid as possible and lowers the overall deployment risk. SaaS applications require less coding, are simple to scale as your business needs change, are easily configurable, and have more flexible integration options.
- Access to innovation: Once you buy on-premise software, the technology immediately begins to age. Getting the latest innovation requires a time-intensive and costly upgrade 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 appreciates 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 accountability and engagement: 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 maintain 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.
Ultimately, the cloud simplifies small business by taking the burden of on-premise hardware and software away from the internal infrastructure therefore lowering your risk, costs and increasing your operating inefficiencies.
To learn more about running your business in the cloud, visit partek.ca/cloud.