Software-as-a-Service (SaaS) is a software delivery model whereby softwareapplications, such as Enterprise Resource Planning (ERP), Customer RelationshipManagement (CRM), Human Resource administration and payroll and Procurement, arehosted centrally by various service providers at their premises. These hosted applicationscan be delivered to multiple service customers via an existing Internet connection, with abrowser based front-end, or via a thin client system.As all hardware and support services are provided by the service provider, operationalcosts for customers are reduced in comparison to a traditional, in-house supportedsoftware application. Traditional cost estimates for the deployment of on-premise softwareapplications exclude personnel costs that are needed for ongoing support andmaintenance. Depending on certain variables, such as the application involved, thesecosts can vary between 50% and 85% of the total cost of ownership of the application.Additionally, the cost of maintenance, periodic upgrades and continued support, on anannual basis, can be up to four times the initial cost of purchasing the application.From the perspective of the service customer the most difficult part of determining whetherto move to SaaS is the total cost of ownership (TCO) calculation. This is due to the factthat the TCO does not merely include the cost of new licences, but also the carefulconsideration of certain variables, before a potential service customer can make a decisionregarding a potential move to SaaS. These variables include considerations such as:- Physical and logical communication interfaces;- User requirements;- Security and privacy of information and data;- Customisability;- Availability of services and data;- Service levels;- Data ownership; and- Integration with existing systems.Presently no comprehensive framework exists that sets out the various aspects to beconsidered by a user company when determining whether to adopt SaaS, or not. Thepurpose of this study is to provide a comprehensive framework of considerations relatingto the adoption of SaaS by user companies in the form of a Total Cost of Ownershipcalculation. The framework was compiled after considering the variables that wouldinfluence the decision to move to SaaS, the impact of these variables on the potentialSaaS customer and the costs associated with each of the above aspects.The framework compiled can assist potential SaaS customers in the decision to adoptSaaS. In addition, this table of considerations can also be used by the potential SaaSvendor in determining the viability of their SaaS offering, when compared to an equivalent,on-premise based software solution.
