SaaS adoption

For all the benefits of SaaS, enterprise adoption may be hampered by a number of factors. These may vary from region to region but are mostly generic. These include total cost of ownership, trust and privacy, and application performance.

Let’s look at total cost of ownership.¬†While infrastructure capital costs and subsequent running costs are avoided in the saas model. In an on-premise model, assume hardware, software and implementation comes in at $100k with recurring annual costs of $25k. For a SMBs/SMEs the saas subscription model is virtually a no brainer since it can be up and running in weeks and can scale as users grow assuming a modest user base of 40 users and say, a subscription cost of $50 per month. The annual cost is still under the annual cost of the on-premise model even before taking the initial costs into account.

In a large corporate environment the numbers are amplified but the cost progression is the same. At some point, as user numbers grow and the application is enhanced to cater to specific business processes, the subscription cost nears and then may surpass the on-premise cost.

The discussion with the executive then should be based not only on the TCO threshold but also on whether the enterprise is willing to develop and maintain a competence in IT infrastructure management. The case can be made for core business application infrastructure management while other functions such as CRM, billing, HR and marketing can be saased-out.

 Zaheer Ismail

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