Don’t Assume SaaS Is Cheaper

February 19, 2009 · Filed Under General, IT Estimating  - 0 Comment(s)

A very enlightening article by Leo King summarized a Gartner study that claims that Software As A Service (SaaS)

According to Gartner:

  • SaaS is cheaper for the first two years
  • Five year total cost of ownership is cheaper for on-site software due to accounting rules allowing depreciation of capital assets for on-site software
  • SaaS is not necessarily quicker to implement.. As least one organization I know struggled for many months trying to get a SaaS CRM solution to provide the functionality of their prior in-house solution.
  • There is another factor consideration that Gartner may not have considered…. The monthly or annual cost of software delivered as a service may have a much lower fee due to paying by the month versus paying for the entire system up front.


The five assumptions are:

Assumption 1 – SaaS is less expensive than on-premises software. Sometimes

Assumption 2 – SaaS is faster to implement than on-premises software. Sometimes

Assumption 3 – SaaS is priced as a utility model.  Rarely

Assumption 4 – SaaS does not integrate with on-premises application and/or data sources.  Much  SaaS Software Does Integrate
Assumption 5 – SaaS is only for simple, basic requirements. Not usually but there are some limits

Details are in the Gartner report “Fact-Checking: The Five Most-Common SaaS Assumptions.”


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