Software as a service, SaaS, has a lot to recommend it; it does not require a technical staff to maintain; it does not require constant technical maintenance, like backup and restore, by non-technical people; upgrades are handled by the vendor; you can access from anywhere at any time; you can share data with others, like vendors and partners, seamlessly.

But until today I have never really given a lot of attention to the fact that SaaS can cost 1/5 the price of on-premise software. A forty person company recently asked for a proposal. They are going to start with accounting and the sales staff, so 10 users roughly. With software, services and support we offered somewhere in the neighborhood of $33,000 for year one. A system from Microsoft with similar functionality and with services and annual support would cost roughly 5 times as much, and you still need a technical person on staff to maintain the application and keep everything running smoothly. $160,000 is a steep capital investment in this environment.

NetSuite pricing, on the other hand, enables you to purchase a strong mid-market software suite with 1/5 of the cash and with a lease you can even use 12 equal payments to pay for it. The kicker is that you do not need to have a technical person on staff, and at roughly $50,000 a year for a young techie, you are actually saving money by moving upmarket to a full and integrated suite.

I know the accountants out there are going to respond that while NetSuite is less costly year one, by the time you get to year 6 the on-premise system is going to start paying back its cost. I disagree. By the time you get to year 6 you will have spend many thousands of dollars in additional hardware, maintenance and support services for you on-premise system. The benefit of on-premise never does catch up to the fact that with SaaS you spare your company a lot of hardware and personnel costs. You can check out this Yankee Group whitepaper and read it for yourself.

If there was ever a time to consider SaaS, 2008-2009 is it. To run a modern, profitable company you must have good software. The only question is are you going to spend your cash reserves upfront to purchase it, and then spend even more to maintain it; or are you going to let the experts handle the maintenance while you deal with a monthly subscription?