Saas vs. on premise - How to Determine the Best Solution for your Sales Channel

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Introduction The trade-offs are complex. The results and
consequences are obscure. The need to find an
appropriate solution swiftly, perceptively and
without disruption mandates careful scrutiny.
For channel-intensive businesses, the decision
to opt for a Software-as-a-service (Saas) cloud-
computing provider versus developing an
internal, on-premise hosting center is a major
challenge; the nature of innovation coupled
with the demand for customizable, mission-
critical software presents a complex dilemma
for manufacturers: To build or not to build?
We, of course, provide a Saas solution here at
Computer Market Research, but that does not
mean it’s the best solution for your sales
channel; in fact, an on-premise solution may
very well be the better alternative. Following is
information designed to give you a well-
rounded perspective of the two options, and by
the end, guide your decision-making to the
appropriate conclusion.
9909 Huennekens Street, Suite 110,
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Phone: 858-795-1021
Email: info@ComputerMarketResearch.com
Copyright @ 2017 Computer Market Research

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San Diego, CA 92121
Phone: 858-795-1021
Understanding
Saas and
On-Premise

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San Diego, CA 92121
Phone: 858-795-1021
What is Saas
Cloud-Computing?
Hosted offerings where all required hardware and data
storage is located “out on the Internet.” These services—
typically presented as a subscription-based model where
the consumer only pays for what is used—combine
networks, servers, licenses and applications, which are
configured to generate huge efficiencies of scale.
Key considerations:
 Pay what you use (subscription model)
o If you scale up, you pay more
o If you scale down, you pay less
 No mandated hardware investment
o Bundled and calculated into
subscription payment
 Licenses fees
o Bundled and calculated into
subscription payment

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San Diego, CA 92121
Phone: 858-795-1021
What is On-Premise Data Storage
All mission-critical equipment (hardware, licenses, servers, OS, etc.) is acquired, installed, controlled and operated within the four walls
of your business; additionally, physical security, electricity and balance sheet entries to carry assets are managed on-premise.
Key considerations:
 All investments are on you
o If you need to scale up, you will
acquire an additional
investment
o If you need to scale down, you
will acquire a “sunk cost” or
write-off
 Licenses maintenance
o On-going license(s) fees
o Scaling down may not result in
discount
o High probability to invest in
additional licenses
 Hardware investments
o Responsible for all hardware
refresh and/or upgrades

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San Diego, CA 92121
Phone: 858-795-1021
One of more challenging components
of understanding Saas vs. on-premise is
proper identification of the (hidden)
costs and activities associated with
each implementation. In other words,
differentiating the costs that are
obvious, and the costs that are not.
Cost & Activities – The Tip of the Iceberg

The Costs on the Surface
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San Diego, CA 92121
Phone: 858-795-1021
Saas
System Implementation
Subscription payments
On-Premise
Hardware
Software License
System Implementation
The Costs below the Surface
Hardware Upgrade & Refresh
Software License Maintenance
Add Licenses
Technical System Administration
Security (Patch) management
User Experience Tuning
Training
Partner Network Support
Configuration Changes
Training
Partner Network Support

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San Diego, CA 92121
Phone: 858-795-1021
VS.Saas On-Premise

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San Diego, CA 92121
Phone: 858-795-1021
Cost, Cash Flow and Accounting
Saas On-Premise
 Lower up-front cost
o Costs classify as OPEX
(operational expenditure)
 Mitigated price control
o Lack of control of pricing
structure due to feature
enhancements, timing of
updates, etc.
Pro:
Con:
Pro:
Con:
 TCO (Total Cost of Ownership) may be lower than
Saas (or break even between 2-4 years)
o Less obvious than up-front costs, however,
your TCO will be lower due to one-time
license fees and annual maintenance
 Equipment failure risks, high-upfront and
training costs
o On-premise deployments can put a
serious financial strain on companies due
to the high initial investment required

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San Diego, CA 92121
Phone: 858-795-1021
Cost, Cash Flow and Accounting Cont…
Your cost-of-entry for Saas is lower than on-
premise because there is no hardware you need to
purchase.
This indicates your CAPEX (capital expenditure) will
be much lower if choosing to go with a Saas
vendor because there is less up-front capital to
consider.
Depending on your budget, the Saas model is also
likely easier to receive approval due the as-needed
(OPEX) pricing structure it entails; your costs are
predictable, which leads to more accurate
budgeting.
With the Saas model, there are typically two
costs to consider
1.) Implementation, and 2.) Reoccurring
service fees.
Given the configurability of Saas, the pricing
structure of implementation is flexible as it’s
relative to your needs (e.g., storage, number
of channel partners, volume of claims and
transactions, etc.).
Support and maintenance fees are typically
fixed and incurred within your subscription;
there is typically no penalty associated with
technical support or service errors on the
vendor-end.

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San Diego, CA 92121
Phone: 858-795-1021
Cost, Cash Flow and Accounting Cont…
Given the unique requirements of each business, implementation costs (CAPEX) are typically
negotiable. It is not uncommon for Saas vendors to waive certain implementation costs due to some
arrangement in monthly fees, such as contract extensions, signing up for premium services, etc.
With the on-premise model, there are no monthly subscription fees to consider because most of the
charges stem from annual or multi-year plans.
Furthermore, you own the hardware, which means you have the ability virtualize your platforms,
storage devices and computer networking resources for other internal needs. If your Saas vendor were
to go out of business, you lose all services, which means you may be subject to serious productivity
issues and partner dissatisfaction.
However, there are several extra costs you may need to consider, such as training costs (IT supporting
internal users), insurance for equipment failure, on-premise maintenance fees, etc. Ultimately, with
on-premise, your costs are less predictable, which will affect how you budget, so it’s imperative to
bring accounting and your CFO into the discussion during evaluation.

 Customization and integration
o Although configurable, Saas providers may
not be as flexible to customize your solution
to fit your business needs and requirements.
Additionally, cloud services frequently rollout
new updates and features, which may affect
stability in function and ease of use.
 Ease of deployment
o Quick set-up, on-demand scalability, easily
scale down and less IT intervention
 Additional infrastructure hurdles
o Longer implementation, difficult to scale
down, slower release updates , and
customization is more expensive
 High level of control
o More flexibility to customize your solutions;
tailor end-user experience and develop deep
proficiency and expertise in the applications
you deploy
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San Diego, CA 92121
Phone: 858-795-1021
Implementation & Scalability
Saas On-Premise
Pro:
Con:
Pro:
Con:

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San Diego, CA 92121
Phone: 858-795-1021
Implementation & Scalability Cont…
Scalability, for companies in rapid growth mode, may view
the Saas model as the more viable solution. Whether you
have recently acquired new channel partners, attempting
to enter new territories or disrupt uncharted markets, a
Saas provider will provide you peace of mind, knowing you
have the resources intact to handle any situation. If
more/less storage space is required, the Saas provider can
automatically provision changes and adjust monthly pricing
accordingly.
Saas providers can get you up and running in a matter of
days/weeks given the systems are already in place. In
addition, what takes Saas providers days/weeks/months to
do can take an IT department months or years to complete.
This largely depends on competing IT projects and lag time
associated with internal provisioning and logistics that go
into acquiring the proper hardware.
In addition, Saas vendors may have limited flexibility to
customize your solution to fit your exact needs. Given the
amount of customers a Saas provider may have, there has
to be some level of consistency in their implementation.
Although this concept varies significantly, developing an on-
premise solution will give you exactly what you need
whereas a Saas provider cannot always guarantee.
Nevertheless, if you have a high peak-to-average load ratio,
customization may not be as important to you as utilization.
It is up to you to decide which factors are of highest
priority.
Once your on-premise infrastructure is in place, any
business changes that require you to scale down may result
in a “sunk cost,” as it becomes too complex to backtrack
systems you built “by hand.”

 Software and data live outside your walls
o Difficult to ascertain who has access to what,
or where the location of data is
 No alternative
o Disaster recovery and backup may be of
critical concern and require an additional
investment that must be implemented by
the customer
 Requirements and regularly processes
o Great for companies that do not require
much “data shuffling;” highly customizable to
fit internal process compliance
 Industry Excellence
o It’s likely the Saas vendor maintains a
cloud-based environment that is more
secure than the customer, which includes
disaster recovery and backup
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San Diego, CA 92121
Phone: 858-795-1021
Saas On-Premise
Pro:
Con:
Pro:
Con:
Security

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San Diego, CA 92121
Phone: 858-795-1021
Security Cont…
No matter what your software vendors says no one cares more about your data than you do.
The reality is that if your company opts to go with a Saas provider, you leave your company vulnerable.
However, vulnerability does not necessarily equate to irrationality. Saas vendors have their own internal data they too want to
protect, and likely use the same system protocols to protect customers as they do their own; so if we apply the “no one cares
more about your data than you do” rule, your vendor—at the very least—cares just as much about data security as you.
If you decide to outsource your channel computing needs, you’re given the added benefit of some form of disaster recovery,
which may give you some added peace of mind. That’s because most Saas vendors have redundant instances in very secure
data centers in multiple locations.

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San Diego, CA 92121
Phone: 858-795-1021
Founded in 1984, CMR brings 33 years of industry experience and knowledge
to its customers. Over the years, we’ve identified the obstacles in the way of
managing indirect channels and have focused on developing solutions that
overcome them.
Our cost-effective software streamlines channel activities, reduces conflict,
and enables your channel partners to effectively market and sell your
products.
We’re confident that our automated services will significantly reduce the
amount of resources spent on tedious administrative processes that have
traditionally supported channel activities.
Here’s a snapshot of some of the software applications that we offer:
Channel POS
Channel Inventory
Deal Registration
Co-op/MDF Management
Reseller Profile
Rebate/Spiff Management
Document Management
Ship and Debit
And much, much more

Saas vs. on premise - How to Determine the Best Solution for your Sales Channel

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