{"id":68986,"date":"2021-04-09T05:00:38","date_gmt":"2021-04-09T03:00:38","guid":{"rendered":"https:\/\/www.sage.com\/en-za\/blog\/?p=68986"},"modified":"2026-01-29T15:45:36","modified_gmt":"2026-01-29T13:45:36","slug":"how-saas-delivers-cost-savings","status":"publish","type":"post","link":"https:\/\/www.sage.com\/en-za\/blog\/how-saas-delivers-cost-savings\/","title":{"rendered":"How SaaS delivers cost savings"},"content":{"rendered":"
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\n\t\t\t\t\t\t\tTechnology & Innovation<\/a>\t\t\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t
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\n\t\t\t\t\t\tHow SaaS delivers cost savings\t\t\t\t\t<\/h1>\n\t\t\t\t<\/div>\n\n\t\t\t\t\t\t\t\t\t

\n\t\t\t\t\t\t\t\t\t\t\t<\/p>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\n\t\t\t<\/div>\n\n\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t<\/div>\n\t

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\n\t\t\t\n\t\t\t\t\"\"\t\t\t\tGerhard Hartman<\/span>\n\t\t\t<\/a>\n\n\t\t\t\t\t<\/div>\n\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t<\/div>\n<\/div>\n\n\n\n

In this article, w<\/span>e<\/span> look at the <\/span>benefits of software delivered as a service, commonly referred to as \u201cSaaS\u201d<\/span>.<\/span>\u202f<\/span>We\u2019ve previously<\/span> acknowledged <\/span><\/a>that all SaaS is delivered via the cloud <\/span>and<\/span> concluded that not all cloud <\/span>i<\/span>s SaaS. Indeed, while there are benefits of web-enablement and acces<\/span>sing<\/span> software via the cloud when it comes to cost savings,<\/span> <\/span>SaaS<\/span> brings <\/span>significantly more<\/span> potential<\/span>.<\/span> <\/span><\/p>\n\n\n\n

SaaS<\/span><\/b>-driven c<\/span><\/b>ost savings<\/span><\/b> <\/span><\/h2>\n\n\n\n

While the savings <\/span>c<\/span>ome from various sources, the most obvious is the lower start-up cost. <\/span> <\/span><\/p>\n\n\n\n

There is no upfront fee for licensing, and implementations are typically a month quicker to the \u2018go live\u2019 milestone. Also, removing the cost of hardware and infrastructure purchases, as well as the associated maintenance and obsolescence, makes a massive difference to the cost of SaaS.<\/span> <\/span><\/p>\n\n\n\n

The cost and effort of upgrades <\/span>are<\/span> also diminished, brin<\/span>g<\/span>ing the total cost of ownership even lower. <\/span>You also have the option to treat your SaaS investment as an operating expense rather than a capital one. <\/span> <\/span><\/p>\n\n\n\n

Despite<\/span> these factors, some industry influencers (consultants, analysts and industry observers) argue that SaaS is no less expensive<\/span>, reflecting a <\/span>\u201crent versus buy\u201d mentality.<\/span> <\/span>But l<\/span>icensing software is very different from purchasing a house. You are not building equity in your software purchase <\/span>\u2013<\/span> <\/span>you\u2019re doing quite the opposite. <\/span> <\/span><\/p>\n\n\n\n

The naysayers <\/span>usually highlight the<\/span> break-even points in the five<\/span>–<\/span> to seven-year range. In other words, after five (or seven) years, you will have paid just as much<\/span> for your software<\/span> as if you had licensed and run it on-premise. <\/span>H<\/span>owever, <\/span>they <\/span>rarely look at the <\/span>complete<\/span> picture or <\/span>consider<\/span> the hidden costs. Even if they <\/span>are<\/span><\/i> right, it still implies that you paid less at start-up. <\/span> <\/span><\/p>\n\n\n\n

Also, once you\u2019ve reached the <\/span>break-even point, the costs associated with a traditional license don\u2019t stop. <\/span>The costs of maintenance<\/span>,<\/span> staff<\/span>, and <\/span>obsolescence<\/span> remain<\/span>.<\/span> <\/span><\/p>\n\n\n\n

Let\u2019s <\/span>look into <\/span>each of the different opportunities for cost savings<\/span> offered by SaaS<\/span>.<\/span> <\/span><\/p>\n\n\n\n

Start-up costs are lower<\/span><\/b> <\/span><\/h2>\n\n\n\n

While some understand <\/span>how business software is \u201cbought and sold\u201d<\/span>,<\/span> many business leaders <\/span>still <\/span>don\u2019t quite understand that enterprise applications are neither bought nor sold<\/span> <\/span><\/p>\n\n\n\n

In the past<\/span>,<\/span> the software <\/span>you <\/span>used to run your business was always licensed for use<\/span>,<\/span> and that practice continues today for on-premise deployments and many hosted ones. It may be licensed to be used by a company, on a particular computer<\/span>,<\/span> or by other criteria such as <\/span>the <\/span>number of users. This license fee is a one-time, upfront cost that is typically large enough to be viewed as a capital expense.<\/span> <\/span><\/p>\n\n\n\n

After the initial payment, there are on<\/span>g<\/span>oing recurring costs for maintenance. A maintenance agreement typically provides both technical support and innovations. Some of those innovations will be included in your maintenance fee<\/span>; <\/span>others (<\/span>such as <\/span>new modules or <\/span>extensions) might require additional purchase. Maintenance is typically priced as a percentage of the software license and can be accounted for as an operating expense.<\/span> <\/span><\/p>\n\n\n\n

SaaS, on the other hand, carries no upfront <\/span>outlay<\/span>. You do not license the <\/span>software;<\/span> you subscribe to it. <\/span>The cost of maintenance and upgrades are included in the subscription fee, and you can treat your purchase as an operating expense right away<\/span>, which<\/span> <\/span>lowers<\/span> the barriers <\/span>to<\/span> entry.<\/span>

\n\tDownload your free copy of CFO 3.0: Digital transformation beyond financial management<\/a>\n<\/div>\n<\/span><\/p>\n\n\n\n