IT Service Management
Showing results for 
Search instead for 
Did you mean: 

Re: The economics of SaaS – Total cost of ownership and other reasons why SaaS can be the right choi


This is a great question. It is my sense that the cost difference once you get beyond the hardware,  implementation, and maitenance cost is the cost of customizing. Software is meant to twist and turn. However, a service is not. This to me is where the cost difference will be really be found. What do you think?

0 Kudos
About the Author


Mr. Suer is a senior manager for IT Performance Management. Prior to this role, Mr. Suer headed IT Performance Management Analytics Product Management including IT Financial Management and Executive Scorecard.


This is a great question. It is my sense that the cost difference once you get beyond the hardware,  implementation, and maitenance cost is the cost of customizing. Software is meant to twist and turn. However, a service is not. This to me is where the cost difference will be really be found. What do you think?


Michael, My personal opinion is that the SaaS TCO equation has changed a bit over the past 3 years ago. 3-4 years ago, arguments would be made along the lines of "a SaaS implementation will cost less than your current (on premise) maintenance" or a variation would be "a new SaaS implementation will cost less than upgrading your current (on premise) service desk". There were valid points to both arguments, but there were also some/many liberties taken depending on who was telling the story.


SaaS TCO is much better understood these days. And the product/platform lease vs buy economics is not as important as it was ~3 years ago. I agree with your points about other factors now being as important. I also submit that customer expectations on usability - especially wrt configuration, administration, and maintenance has also positively impacted on-premise solutions (for example Process Designer being available on Service Manager and Service Anywhere).


And following on from this, the services/implementation considerations and associated costs are definitely part of the equation (as both you and Myles) note. Plug for my recent post on this topic.


Lastly as you also note, HP has ROI models based on the Alinean platform. For the service desk, these look across processes and other administrative dimensions for both on-premise and SaaS. HP and partners can help run these for interested customers.




SaaS or On-premise?  Seems to always be the big question these days when it comes to acquiring software.  Michael - I love your title “SaaS, TCO and you” because so often people forget about the “and you” component when first looking at the SaaS option. It would be a lot easier if we could just compute a TCO, and use it to make a decision, but the reality is that there are many other business factors as you mention in your article, and many are difficult to quantify. When asking “SaaS or on-premise?” the correct answer in my mind is almost always “it depends” and TCO is simply one facet in the decision process. 


Even TCO computations can be subjective.  For example when factoring the infrastructure cost as part of TCO, you need to consider if you are doing an “apples to apples” comparison of costs.  SaaS hosting facilities may have better security (both physical and electronic), full redundancy and a comprehensive disaster recovery capability. A SaaS provider may also pay for premium support contracts from 3rd party vendors that provide early issue notification, faster incident support and so on, as they need these to support their aggressive SLAs.  How does this compare to your in-house data center?  And do such differences even matter to your business model?  This is just one example of how the analysis is not always black and white.


I'm amused at your contention that "SaaS is your all-round careless package". I think its care-free, sure, to your likely intent -  as the decade-plus experience of (blatent plug alert HP SaaS, for example, certainly adds to the intangible benefit of trusting that these benefits are consistently delivered.  And this is a critical consideration. It's not just whether the TCO is positive, or the TCO-plus-intangibles is positive, but sleeping well at night with a SaaS model built into the IT infrastructure means trusting the SaaS vendor to deliver on the productivity improvements of the CMM you mention. 


Software as a Service is a proven delivery methodology - yet it is important to remember that not all SaaS providers are alike - and that is a variable that impacts the real-world TCO and warrants consideration in the final analysis. 


These are all great comments! Let me add my perspective ...


@Myles: Absolutely, the more you customize any software, the higher the maintenance cost for this software. This is definitely an important component. And there are some interesting new approaches to this like codeless configuration.


@Chuck: Agree - I find this interesting but not surprising: Usability and other factors are becoming more and more important factors over others like TCO. Although, in conversations, I still see the "TCO myth" coming up frequently. 

I would rather look at the ROI. and by the way, HP updated the ROI model based on the Alinean platform. The ROI tool now also allows to look at both HP Service Manager (on-premise) and HP Service Anywhere (SaaS) - and most of the other HP software solutions.


@Mary: No doubt ... there are so many reasons and drivers for answering the question "SaaS or On-premise" including all the intangible elements like security. Maybe that's worth another discussion (blog article). What do the other readers think here?


@Jim: At least someone who is amused ;-) But seriously, it's definitely care-free so that you need to care less about how to reach a high level of availability and security, for example. And not all vendors are alike. How could I forget about this!? Sleeping well at night also means that you know you can rely on a trusted business partner.

June 6 - 8, 2017
Las Vegas, Nevada
Discover 2017 Las Vegas
Join us for HPE Discover 2017 in Las Vegas. The event will be held at the Venetian | Palazzo from June 6-8, 2017.
Read more
Each Month in 2017
Software Expert Days - 2017
Join us online to talk directly with our Software experts during online Expert Days. Find information here about past, current, and upcoming Expert Da...
Read more
View all