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How do you compare a SaaS annual fee to a one-time license fee?

ERP, Software Selection

We have found that on average the one-time (on premise) license fee is 3 times the annual fee based on our experience in evaluating RFP responses from vendors. One might think that the ratio between license and annual fee should be greater but that does not take into account the additional hosted services provided by the SaaS vendors including maintenance fees which are billed annually by on premise vendors at approximately 20% of the license fee. It’s still early days for SaaS and as competition heats up the license ratio:annual fee will increase as SaaS fees are reduced. We recommend that even if the SaaS costs are high that you don’t rule out SaaS vendors just on cost. They are willing to negotiate and there are other factors that should be considered in making a decision.

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