The Long Term Financial Viability of SaaS

There are conflicting reports over the short vs. long term financial viability of SaaS applications.  One train of thought is that the SaaS model provides short and long term ROI because of the predictability cost, the elimination of large upfront cost to deploy the application, and the ability to manage licenses more freely.  The other side of the argument is that after year two, the ROI of SaaS declines because you're still paying for the software while standard on-premise applications are paid for.  The argument is similar to leasing vs. owning a car.  But that's where the similarities end.

What many SaaS detractors neglect to mention is the cost of maintenance. Unless you purchase an application as-is and plan to only use that version then maybe the on-premise model works for you.  But if you need technical support or plan to upgrade the software over time, you need to have an active maintenance contract.  So there's an ongoing cost that needs to be considered.

On the other hand, the SaaS model is essentially a built-in maintenance plan - but so much more.  You're not installing the software on your own servers either for the initial release or subsequent upgrades - it all happens automatically by the SaaS vendor.  Further, support costs are typically built in to the annual SaaS fees, and let's not forget the added benefit of leveraging new functionality in new releases that happen seamlessly.  But the bottom line is, as Darren Wesemann points out in his blog, SaaS is considered an operational cost, a preferred option for most organizations.   

Comments

[realestate]

Well said..
Eileen
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realestate

[128gb usb drive]

Not only are companies of all sizes increasingly interested in SaaS alternatives, but they are accelerating their customer decision-making processes and reducing the salescycles for SaaS vendors. They are also signing bigger deals which promise greater margins for the SaaS providers.

[Finance Dissertation]

well its soo good to see this information in your post, i was looking the same but there was not any proper resource, thanx now i have the thing which i was looking for my research.