CLOUD VS. ON-PREMISES: COST COMPARISON (PART TWO)
In Part One of this blog, we talked about your general approach to a cloud vs. on-premises evaluation, based on your business environment. In Part Two, we’ll discuss many of the factors that play a part in such an evaluation. Those factors are listed below but don’t stop there. Try to think of any additional factors that will affect your financial comparison of the two systems. Here’s a great start:
a) Software Licensing Fees: You should look at the software costs from the publisher, over a three to five year period. For cloud software, consider the initial and renewal fees, any applicable support fees, etc. These fees should include all of the cloud publisher’s modules that you’ll need, and it should include the fees for all the required numbers of users. For on-premises software, including initial purchase price and any financing fees, annual software maintenance fees, and any publisher-provided phone support that you might need. In both projections, including user count growth, and factor that into your analyses. 
b) Consulting Fees: Include any fees suggested by outside consultants for training or implementation services. Remember that these fees can equal or exceed your software licensing or purchasing fees, for the first year. Include any maintenance renewal fees required or suggested by the consultant. You should only accept fixed-price proposals. You should not accept proposals that give the “likely” number of hours, plus the hourly rate, or that give the minimum and maximum estimates. If the provider that you’re considering using doesn’t know their business well enough to give you a firm price, then you shouldn’t be using them.
c) Development Fees: These are any fees required to tailor the software to exactly meet your business needs. As with consulting fees, you should only accept a fixed price proposal.
d) Additional Software: Many on-premises application packages require an additional relational database management system (RDBMS) to be purchased, such as SQL, Access, etc. You MUST ask this question of your prospective on-premises application provider, and if there’s an additional cost, it will likely be substantial and must be factored into your analysis.
e) Communications, Networking, or Operating System Software: Many on-premises packages require such software, which you may not already have installed.
Continued in Part Three …
About the Author
Doug Deane is President of DSD Business Systems, an international provider of on-demand (cloud) and on-premises ERP and CRM software, specializing in wholesale distribution, manufacturing, warehouse management, inventory, business intelligence, and eCommerce software. DSD offers NetSuite Cloud ERP, NetSuite CRM, NetSuite eCommerce, Sage 100 ERP (formerly MAS 90), Sage 300 ERP (formerly Accpac), Sage 500 ERP (formerly MAS 500), Sage FAS, Sage HRMS (formerly Abra), Sage CRM, Sage SalesLogix, Sage Add-Ons (Extended Solutions), and Custom Programming. DSD has been a multi-time Sage President’s Circle award winner, a two-time Sage Gold Development Partner of the Year recipient, has been recognized by the San Diego Better Business Bureau (BBB) as a Torch Award Finalist (2009) and Torch Award Winner (2010) for Marketplace Ethics, and has been recognized by the Council of Better Business Bureaus as a 2012 International BBB Torch Award Finalist for Marketplace Excellence.
