Updated · Originally published
There’s a fallacy afoot in the ERP space, especially when it comes to . Some people think: “I may pay more up-front for on-premise ERP, but in the long run, I pay less because I own the licenses. So in the end, my total cost of ownership is lower.”
Here are the facts (using 15 Microsoft Dynamics NAV seats over five years as an example):
LICENSE COSTS
On-Premise: $74,000, and this does NOT include $12k annual enhancement fees.
Cloud: $32,400 based on the SPLA, which comes to approximately $6480 a year for 15 seats. It would take 11 YEARS before on-premise costs were equaled… and has anyone out there ever held their BRL/perpetual license—and the version it licenses—for more than a decade.
Ok, so there’s that. The license argument is over: wins.
But lower is just beginning.
Why? Because the cost-savings in licensing are easily the smallest part of the TCO picture. Where lower TCO resides to the fullest in the savings you enjoy in never having to worry about infrastructure—and all that goes to supporting it—ever again.
Let’s run the numbers… just for fun.
SERVER HARDWARE
On-premise: $10,000 (roughly for 15 NAV seats)
Cloud: $0
POWER
On-premise: $1,000 (annually)
Cloud: $0
IT STAFF SUPPORT
On-premise: $35,000 annually (50% of one FTE’s time)
Cloud: $0
The above are estimates, of course, but according to a recent study, “IT Infrastructure costs… account for about 11% of the total cost of deploying on-premise business applications… Comparably, there are no IT Infrastructure related costs for cloud-based business solutions” (Hurwitz & Associates).
The same study showed that “spending for application implementation and support…is significantly higher for on-premise solutions than for cloud-based solutions, as much as 3.5 times more…”
So, is lower TCO possible in the Cloud? We would say it’s simply unavoidable.
by SaasPlaza