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Which has lower TCO: SaaS or hosted on-premise applications with similar functionality? Is the hosting option a good alternative? (Webinar Attendee Question)

This question was asked during the Proformative webinar "The Evolving Role of Finance Leaders: Technology Strategists."  A video of the webinar can be viewed here:


Topic Expert
Donald Koscheka
Title: Principal
Company: Bluecloud Communications
(Principal, Bluecloud Communications) |

I created a questionnaire to help my clients understand the answer to this question. There are a lot of factors to consider when deciding between SAAS and on-premise. But here are some guidelines: if the service can be provided using identical hardware, software and people with similar skills, then hosting is probably going to be a better option (because hosting providers can achieve an economy of scale that the average corporation cannot). Solutions like email, accounting, CRM, project managment, clinical trials, are examples of solutions that could easily be moved to the SaaS.

Some services cannot be easily moved to the SaaS - those that require specialized hardware (e.g. Laboratory or plant floor systems) or that require specialized technical skills to run.

Another factor to keep in mind is latency - some systems need to run in real-time or near real-time. These solutions generally need dedicated network connections as well as monitoring and support systems (trading floors).

I would be happy to post my questionnaire (it's an excel spreadsheet) if that would be useful.

Tom Kelly
Title: Managing Director
Company: T > Edward, Inc.
(Managing Director, T > Edward, Inc.) |

Don't try to reinvent the wheel when it comes to determining your ROI or total cost of ownership (TCO) - there are a number of ROI calculators and methodologies to choose from on the web. But do take the time to be as thorough as possible when considering the costs that will be mitigated and the process efficiencies that will be gained by embracing the cloud. In my own experience implementing both cloud and on-premise business systems, the hard dollar benefits of the cloud are clear - no need to purchase a server, headcount avoidance and reduction, no costly IT maintenance and upgrades, etc. But you also need to consider the efficiency gains you will achieve, such as anytime, anywhere access to data, streamlined business processes and enabling cost effective telecommuting.

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