Saas vs. In-House Server Comparison

How does the cost of cloud-based software (SaaS=Software as a Service) compare with software installed on a server in your office?

It is a difficult task to make a fair and accurate comparison. It is much like comparing the proverbial apples to oranges. But, in the space below an effort is being made to do so. Needless to say, your needs and requirements are probably different than those assumed in this article.

1. Real cost of ‘buying’ server-based software

Technically, software that you “purchased” and installed on your server in your office, was never really purchased. It was very likely licensed for your use. Furthermore, each year you were offered a maintenance agreement for service and support. At times, the maintenance agreement included upgrades to the latest version. When it did not, you had to re-purchase your software at a certain discount. Here is a small mathematical calculation as to the cost of your usage: A software that you “purchased” for $10,000 today would lose 20% of its value each year. That means within 5 years that software is basically worthless. Over that time your software cost you $2000 per year or $160/mo. Five years is a lifetime these days. The same idea is in the use of your car. If you plan to use a car for 10 years it is likely that purchasing it is preferable. However, if you wish to drive newer cars leasing is usually preferable. One other observation: In the case of cars you could resell the car on the open market. With software, you are basically stuck. There is no market to resell any type of software, let alone bakery management software.

2. Real cost of buying hardware for a server based solution

For our purposes let us assume that you have an average size business and that you require 5 workstations all connected to a server via Ethernet cables. The cost of each work station, of course, varies. Since a great deal of number crunching and data processing takes place in the workstations, going cheap is not advisable. Currently, the prices range from $1000 to $3000, depending on the quality, memory, and disk space. Let us assume that you go with workstations priced at $2000 each including Windows software. All five would cost $10,000. You also need a server and server software. Again the exact cost depends on the capacity and quality of your server including backup tools and such. A good estimate would be $10,000 including installation. Hardware, much like software, also needs maintenance. It is folly to assume that once you acquire your computers they would last you 10 years without any problems. That never happens. It is not a matter of if, but a matter of when, a computer will crash. Let us assume you hire a computer technician who would help you one hour each month at the cost of $150/hr. Another important question for our analysis is how long does a computer last? With proper maintenance computers can function for approximately 10 years. The problem comes from makers of peripherals, like printers, that introduce ‘newer’ versions of their hardware that require more powerful computers. Microsoft also introduces newer versions of Desktop Windows and Server Windows that necessitate the purchase of newer and better computers with more memory and storage. In short, every 5 years you need to revamp your desktop computers, the server, and the operating system that goes with it. At what cost? That $20,000 that you spend today would last you 5 years at the cost of $370/mo.

To sum up the costs of a server solution per month, you pay $160 for software and related maintenance, $150 for a computer technician, and $370 for all hardware. So, the total cost of local server based solution is around $680/month for 5 users. Over 5 years, that totals $39,000

How does that compare to ‘leasing’ a solution? In other words how does that compare to SaaS (Software as a Service) solution?

For you to use cloud-based software you do not need fancy and powerful work stations like you do in the server based solution detailed above. That’s because all of the work is carried out by the servers in the cloud. In contrast, in the case of a local network, a great deal of the work is done in the work stations and that necessitates powerful PC’s. That is why for a cloud-based solution you could purchase a tablet, laptop, or older version of a PC desktop. The only requirement is that they connect to the web.

Compare that to the average POMeSYS client, 5 users is $390/month. Essentially, you are receiving our software for free. Over the course of the 5 years, you would save over $15,000.

As to what solution is better for you?

Fortunately, our task is to provide pertinent information. You need to consult with your information technology advisors to make the right decision for your business, but we believe we can help.