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Software as a Service (SaaS): Always the Best Way to Buy?

Published by in How to Buy Software

There are so many choices when you’re shopping for maintenance software. Among them is whether to choose to buy via licensed purchase or through a Software as a Service (SaaS) subscription. Before you decide, be sure you understand the pros and cons of each—and how purchase options differ from deployment options.SaaS always best way to buy

SaaS has become a popular method of purchasing business applications. People remain confused, though, as to what “SaaS” really means, and how it differs from “Cloud-based” solutions or software that you purchase outright. In this article, we’ll address a few pertinent questions and provide some guidelines to help you keep it all straight.

Isn’t SaaS the same as Cloud-based?

Simply stated, SaaS is just another method of paying for software, and not a distinction between whether it’s installed locally or hosted in the Cloud. When you opt for a SaaS subscription you’re choosing to rent software for a specified period of time instead of buying a license to use it indefinitely.

What if I want SaaS, but need it installed locally?

Vendors typically offer SaaS solutions via online hosting (in the Cloud), but occasionally may provide locally installed software with an expiring license—essentially providing a SaaS option you can host on your own servers. If you fail to renew your subscription and install a new license key, the software stops working.Jason Johnson Pic 1

What if I want to purchase software, but don’t want to install it locally?

Some vendors will host purchased software for you for free. This varies, though, so be sure to ask. Vendors that offer free hosting usually tie it to an annual software maintenance subscription, which also provides ongoing support and software updates.

What’s Good About SaaS?

More bang for your buck—but only at first. If you have a limited budget, you can get more out of your initial investment in the short term. With SaaS, though, you’ll continue to pay, year after year, eventually spending many times the price it would cost to buy the software outright. The licensed purchase price for a maintenance management software package is typically equal to two or three years of SaaS payments.

SaaS won’t lock you down to a vendor or solution. Besides the lower startup cost, SaaS gives you the flexibility of not being “locked in” to a single vendor. If you’re on the fence about a new solution, SaaS may provide you a beneficial trial period to determine if the software meets your needs. You can change vendors at any time without abandoning a large investment—or you can purchase the software you’re using.

It may allow you to pay for software without going through a formal procurement process. If your company divides departmental funding into operational expenses (OPEX) and capital expenses (CAPEX), you may be able to spend OPEX money on your software without making a CAPEX request.

What’s Bad About SaaS?

It’ll cost you much more over time. There are some misconceptions about the cost of SaaS. When you purchase software outright, you pay an up-front price and own a license to use the software indefinitely. The upfront cost of a purchased solution is higher, initially. With SaaS, the upfront cost is much lower, but will rise over time because you continually incur monthly or yearly subscription fees. While SaaS can be more affordable in the short-term, it can quickly become the more expensive option.

You have to keep paying to keep your software. In order to keep using the software, you must continue to pay the recurring SaaS subscription. If you stop paying, you lose access completely. If you purchase software and stop paying for support, you still own the license and can continue using the software.

Let’s Do the Math

Suppose two companies decide to buy software. During year 1, Company A purchases a SaaS subscription for $7,500 per year. Company B buys the software outright for $17,110, and continues to pay 20% of the purchase price in following years to receive support and software updates. During year 1, Company A saves a bundle—almost $10,000 compared to the purchase price. By year 4, though, Company A has paid roughly $5,000 more in total payments. By year 10, they will have paid a whopping $34,400 more than Company B—and they still won’t own the software.Jason Johnson Pic 2

Get the Solution That’s Right for You

The decision to go the SaaS route shouldn’t be based on cost alone. Be sure to consider your deployment requirements (local vs. hosted) separately from your purchasing preferences (rent vs. buy). With a little homework, you can find vendors that have the flexibility to meet your unique requirements.

Looking for CMMS software? Check out Capterra's list of the best CMMS software solutions.

About the Author

Jason Johnson

Jason Johnson

Jason Johnson is the VP, Sales & Marketing at MPulse Maintenance Software. He earned "hands-on" experience in the maintenance world working as an industrial electrician for many years in High Point, NC, furniture factories. Jason combines that maintenance know-how with many years of Silicon Valley consulting and leadership experience to bring MPulse customers world-class maintenance management software built on today's best technologies.


Comment by Manish Chowdhary on

This is an excellent article that covers many of the advantages of SaaS and Premise-based too.

There are some additional benefits for both we can add.

Many SaaS platforms are hosted in state of the art data centers. And, that data center and
multi-tenant application is the only production platform the vendor is running. You’ll typically find that a SaaS Data Center delivers:
• Performance – Best of breed hardware, scalable, elastic on-demand architecture to support peak usage, performance tuning, availability monitoring, on-site and geographic redundancy
• Security and Compliance – fortress-like physical security, network security, and industry-specific compliance features.
• Maintenance – Ongoing software updates and continuous and seamless upgrades for
life (no fixes, patches or IT to manage)

Premise-Based Solutions
For larger companies with unique needs, premise-based can make a lot of sense.
• Software customization and flexibility, enabled by the business’ ownership of
the software and ability to add and change capabilities at will, and on its own schedule.
• Data center excellence, leveraging existing investments in data centers and hosting facilities to run additional premise-based and homegrown applications.
• Data sensitivity and compliance, in cases where a company believes their data center
is more secure than a SaaS provider’s, or if they do not want their data residing outside
their firewalls.

As you can see, there are good reasons to consider either. And, there’s also the “build” decision, which is typically for the biggest of the big, who have excellent software development teams (e.g. Goldman Sachs).

While this whitepaper is unique to the world Order and Inventory Management Platforms, it’s relevant for all businesses: Homegrown, On-Premise, or SaaS? Which approach is best for me?

Pingback by Top 5 reasons to go with a SaaS service instead of building your own OTT platform - Muvi on

[…] Software as a Service (SaaS): Always the Best Way to Buy? […]

Comment by Jason Johnson on

Excellent points, Jackson. However, there are companies, like MPulse Maintenance Software, who offer the “best of both worlds.” If you outright purchase our CMMS software, we’ll host it for you professionally for FREE as long as you pay your annual software maintenance agreement. And if you ever decide to stop paying that and host it yourself, you can do so with no penalty. We’ll even help you port it over.

This arrangement gives you all the benefits you indicate–no need for internal IT, full mobile capability, professionally managed environment tuned to the application, etc., etc.–without being locked in to a “forever agreement.” You own the software outright, but still get SaaS-like hosting.

In short, we offer the benefits of the cloud without the downside of endless renewals. We think it’s the cure for “subscription fatigue.” 🙂

Comment by Jackson Martin on

The best long-term investment is a SaaS subscription that includes support and updates. On-site costs, that also never go away, include workload on your IT department, server maintenance, network maintenance, upgrade fees, paid support, paid training, installation/patch/update downtime, dependent application updates, network security, database management/upgrades, license renewals…so much headache, and you don’t get the mobility, data backup/redundancy, or ongoing support (unless you pay for it) that you get from the top SaaS providers. My IT team loved me when we made the switch to the cloud, my techs love using a mobile app for work orders, and my inventory manager loves being able to pull reports from on the road.
There’s a reason every single CMMS company is changing to cloud-based software…or being bought out.

Comment by Jason Johnson on

Exactly, Jennifer. You got it. SaaS will inevitably cost more than a licensed purchase, because you never stop paying for it. It’s a subscription, so if you don’t renew every year, you lose access to the software. For some people, that works. For example, if you’re really concerned about keeping short-term costs in check and don’t have access to capital.

MPulse Software believes it should be your choice whether to rent the software (SaaS) or buy it (licensed purchase). Check out our video on the topic to learn more:

Comment by Jennifer Smith on

What about the hidden costs in SaaS? I heard that it ends up being more than on-premise deployment after some time. Is this true?

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