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SaaS or On-Premise: Visible versus Hidden Costs

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Fabrice LAMBERT
Team Leader

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We saw in our previous postThe advantages and disadvantages of SaaS and On-Premise solutions.

The cost of licenses is always included in a comparison between a SaaS (Cloud) and On-Premise solution, but the study of license costs, although recurring, is not sufficient and it is the entire TCO (Total Cost Of Ownership) of the solution that must be taken into account, including hidden costs.

The iceberg, figure of the TCO comparison of a solution

A figure is recurrent to compare the TCO of a SaaS solution and the same On-Premise solution: The iceberg.

(Source: https://blog.westmonroepartners.com/rain-down-cost-savings-with-cloud-based-business-applications/)

On an order form, only the tip of the iceberg is visible, the underwater part, representing the hidden costs, is not visible. The size of this second part is however quite different according to the type of solution hosting chosen.

In the case of the SaaS solution, the visible part of the iceberg (the licenses) represents the biggest part of the iceberg. Indeed no hidden costs of hosting and maintenance of servers: no personnel costs for server maintenance, no hosting costs and PRA of the VMs, no investment to be made in storage bays, in network .... All these expenses are covered by the supplier in the cost of licenses.

The only remaining expenses, identical to an On-Premise installation, are user training and the time required to set up and operate the subscribed tool.

Conversely, the On-Premise solution will induce more or less important hidden costs. What is the cost of a system and network administrator, internal or external, who spends time deploying VMs and maintaining them? What is the frequency of tool upgrades? How much time does it take to upgrade? Does it have to be done by the vendor and at what cost? What happens if the operating system supporting the solution changes? What is the cost of migration? All these questions must be answered and costed face to face, often difficult to measure, but essential.

In conclusion:

A complete study of the long-term costs (at least 3 to 5 years) is essential to make an informed choice between the 2 formulas (proposed by the same supplier or through a competitive bidding process). The importance of hidden costs is a significant variable to be taken into account and their estimation is indispensable.

At Coservit, for the ServiceNav solution, we propose two approaches: SaaS or On-Premise to leave the choice and correspond to all the constraints seen in the article. " SaaS or OnPremise supervision? ».

Whether in SaaS mode or On-Premise mode, we have always worked and our work is always oriented in this direction, to have the most packaged solution possible while respecting the essential security elements.

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