May 6, 2010
Software-as-a-Service (SaaS) corporate performance management (CPM) solutions have a significantly lower total cost of ownership (TCO) compared with on-premise solutions according to a research study released Monday by analyst firm Hurwitz & Associates. The research, commissioned by Adaptive Planning, the on-demand financial planning and reporting provider, indicates that the TCO for SaaS CPM solutions is as much as 77% lower. As the number of users increases, the cost of advantage of SaaS does taper: the 77% savings for 10 users slides down to 64% for 100 users. The research focused specifically on CPM solutions from midmarket vendors, including Longview Solutions, Prophix, and Clarity Systems. In addition to the TCO analysis, other findings include: SaaS application software costs are approximately 62% of total solutions costs. On-premise application software costs are approximately 17% of total solution costs. SaaS applications require no infrastructure costs On-premises infrastructure costs range from $150,000 for 10 users to more than $275,000 for 100 users over four years. Commenting on the findings, Hurwitz & Associates partner Sanjeev Aggarwal, said, "Via the SaaS model, companies of all sizes can gain access to enterprise-class solutions without incurring large upfront costs, or having to hire expensive IT staff for initial implementation and ongoing management. It's clear that SaaS is fundamentally changing the software equation in profound ways." CEO of Adaptive Planning, William Soward, added, "The comprehensive analysis performed by Hurwitz & Associates provides clear evidence of the significant economic benefits that the SaaS model provides compared with the traditional on-premise model in the CPM space." Though the report indicates a clear case for considering SaaS CPM, and by extension SaaS solutions in other categories as well, the analysts also noted that proper vendor assessment is crucial to realizing the potential savings of SaaS solutions. To that end, Hurwtiz and Associates included guides for evaluating SaaS vendors, cautioning business and IT decision makers to "try before you buy" and review the following points with care: Service Level Agreements (SLAs) and contract terms Data security Application customization requirements Benefits provided by a third-party VAR or system integrator Pricing transparency Multi-year contracts and commitment The complete Hurwitz & Associates research report is available for download here [PDF].
Benjamin Tomkins is editor of InformationWeek SMB.
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