Buckle up because we’re going to turn on the wayback machine and do some time travel back to a day when companies used mainframe computers. Yes, I said mainframe computers. I guess that says something about how long I’ve been around.
OK, let’s fast forward for a minute and make a quick comparison – mainframes, like many of today’s Do it Yourself (‘DIY’) solutions, aren’t for everyone because they’re expensive to acquire, operate and maintain.
Stepping back in time again, Service Bureaus or more frequently called time-sharing and no, it wasn’t a room in the Caribbean where you went to do your computing, became popular because you could share the burden of expense with other companies. With the advent of the Internet (yes, that’s correct, there actually was a time when the Internet didn’t exist for us mere mortals) a new group of centralized computing pioneers emerged and they were called Application Service Providers (ASP). They offered specialized business applications to help keep costs down and it’s actually from this model that Software as a Service (SaaS) was born. So why would you want to consider using a SaaS provider instead of DIY? I'm glad you asked, here's a hint - to help keep costs down.
SaaS Overview
Often referred to as subscription services, SaaS offers the opportunity for a business to keep its costs’ down because you're not purchasing any software or hardware, you’re simply renting the use of the software which is hosted in a secure facility paid for by the provider and on the provider's hardware. And you don’t have to have an IT staff because all the upgrades and maintenance for the hardware and software are also the SaaS provider’s responsibility.
Cost of Ownership
Let’s take a closer look and compare the Total Cost of Ownership (TCO) of a DIY system to that of SaaS. Frankly, the biggest differences when making this comparison are going to be found in the up-front and ongoing costs. DIY solutions will have substantial up-front costs and one could argue they then have relatively low ongoing maintenance fees, this isn’t taking into account all of the costs as noted in the following side-by-side comparison. Let's take a closer look at how these two models stack up from an investment perspective:
|
Cost Element |
Do it Yourself |
SaaS |
|
Hardware |
Substantial, especially if customized hardware is required. Cost to expand if needs require |
None (no hardware required) for cloud-based SaaS solutions
|
|
Scalability |
Acquire more hardware, license keys and engage IT staff to make needed changes |
Immediate access to more storage without ordering hardware, license keys or engaging IT staff |
|
Disaster Recovery |
Add in the cost to Co-locate your data to ensure you’re protected. On a similar yet unrelated note, the level of security at your facility may also need to be increased
|
Included in your monthly subscription - your data is hosted elsewhere, so if a disaster strikes your business location you can potentially be up and running quickly by simply accessing your application from another location |
|
Installation Cost & Time to Deploy |
Very high in time, money, and internal resources (typically 6 to 18 month deployment process for most Enterprise applications) |
Minimal (installation usually measured in days or weeks)
|
|
Licensing Fees |
Substantial – and often times very restrictive – only allowing a handful of staff access to information |
In most cases the only fee beyond the one time installation costs are the recurring or subscription fee |
|
Recurring Annual Fees |
Moderate (typically 15% to 20% of initial licensing fees) |
Low to Moderate - depending on size and scope of application |
|
IT Resource Investment |
Very high for initial installation and often substantial for ongoing support |
Minimal to almost none (very limited IT involvement)
|
|
Outside consulting/resources |
Varies, but usually significant and increasing over time as you ask more of your system |
None required
|
|
Upgrade Costs |
Out-of-pocket costs are negotiated and vary; labor costs are usually significant
|
Included with subscription - the hosting company is responsible for the application and related operating system and database management system |
|
Focus on Core Competencies |
Cost – Undetermined To operate at consistently high-levels in all critical areas of your business you may find you’re spending more and not necessarily getting the results expected or needed
|
Priceless! SaaS providers allow you to free up internal resources so you can focus on your core competencies
|
|
Greater Access to Specialized Talent |
Cost - Very High Competing for restaurant talent is costly and difficult enough. Attracting and keeping premier IT talent is altogether another story. Not being able to access expert labor will only put your investment at risk |
Included SaaS providers are industry-leaders and are securing top tier-talents because specialists tend to gravitate towards industry-leading companies in order to maximize their potential
|
When comparing TCO for a DIY solution to that of a SaaS system, the costs of the DIY solution are most definitely much higher. There are those however, that will argue that there will come a time when the SaaS subscription costs will catch up to the total costs of a DIY solution, usually about four to six years out. I’d argue that this is only true if the DIY solution doesn’t require any maintenance, upgrades or modifications and let’s not forget to add in the overhead for the IT staff’s time to maintain and any costs for a consultant’s assistance, as needed.
This cost argument also doesn’t take into consideration the value created from continuous upgrades your SaaS provider will make and as you’ll likely find, are covered in the SaaS providers subscription cost. Let’s face it, your business needs are going to evolve over time and having a partner that’s an expert in their field, working to keep your solution cutting edge can only work to your advantage.
Lastly, given the option to cancel or switch to another provider if the existing solution is not working — makes the SaaS alternative significantly more attractive. Why? Two reasons, firstly, you can walk away because you don’t have an investment beyond the monies spent and secondly, you know your SaaS partner is going to be working very hard every day to ensure that you’re getting the results you need and expect. After all, like the restaurant business, SaaS providers are service oriented and you, in this case, like your customers, get to vote with you feet and go somewhere else if you’re not satisfied — try that with your DIY solution.
Do you think a SaaS solution will cost less / more than DIY over the long run? Why?
Mirus is a multi-unit restaurant reporting software used by operations, finance, IT, and marketing.
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