SaaS vs. In-premise – Comparing Apples and a Lemon?
Of late, we’ve seen a couple of interesting prospect responses comparing SaaS and In-premise software. One is the idea that SaaS and In-premise work out to about the same cost over the “long run”. The other is that in-premise vendors, too, include updates to their software, much like SaaS vendors do. We didn’t see these arguments earlier, since we largely sell on a “pull” model and not a “push” one – prospects will have worked out the benefits of SaaS over In-premise before they talk to us. But in the bigger deals, managers bring up these issues in conversations – to beat us down on price, if nothing else! In one case, a prospect told us that an in-premise competitor had quoted Rs. 30,000 per seat plus Maintenance. When questioned about TCO compared to SaaS, the other sales guy sagely (Oops! Freudian slip!) said that “over three years we’ll all wind up costing about the same – I can send you an Excel spreadsheet about it”. Now, I normally don’t react to this kind of crap, since it is so obviously untrue I’d be wasting your time talking about it. And there’s so much detail out there in the web, I’d be wasting electronic ink repeating it all. But this time, it kind of got to me, primarily because of the “update” issue. Here’s why.
Yes, with in-premise software, you do get updates if you buy the Annual Maintenance Contract. But you don’t get upGRADES – what you get are bug-fixes, not enhanced or new features. And that’s a big difference. In-premise software vendors deliver “minor upgrades”, including bug fixes, as part of their AMCs. A major upgrade, though, is priced separately and can run anywhere from 50% to 100% of the original price. So every couple of years, after having faithfully paid for the updates every year, you get socked for nearly your original price for the upgrade. And then you have to deal with the nightmares of installing that upgrade. So much so that companies choose to not upgrade at all till they absolutely have to – they’re that afraid of upgrades upending their business.
With SaaS, on the other hand, both updates and upgrades are incremental and part of the price. So you never wind up having to deal with upgrade nightmares – the vendor does that for you automatically. Hmm, maybe that’s the problem in the comparison – how do you put a value to sleepless nights in Excel?
I’m not done yet – I’m now going to argue that that the amount of additional functionality that you get in a given time-frame from a SaaS vendor is much higher than that from an in-premise vendor. This is not because the SaaS vendor is somehow more committed to his/her business than the in-premise vendor (although that is true of this particular SaaS vendor). It is because the SaaS vendor by design has to deal with lesser operational issues than does the in-premise vendor. With SaaS, we don’t worry about a DLL not registering on someone’s server or a stored procedure not installing on someone’s database. We don’t agonize about a database upgrade script failing because of permissions somewhere, or about needing to do the upgrades within a short-enough time-frame for business not to be affected. The in-premise vendor, poor soul, has to deal with all these issues and more. With all that, s/he has to build truly-useful functionality that customers will like and use. And software is much like pregnancy – putting more people on the job will not necessarily reduce delivery time-frames or increase effectiveness. So it’s not surprising that, in a given time-frame, a SaaS vendor delivers a lot more value than does an equivalent in-premise vendor, updates and upgrades included.
So here’s my suggestion to you if you’re considering your next business app purchase: the pivotal thing is to not be sage about the decision; look at the micro issues and don’t be soft about the questions!
