The following table summarizes the differences in the cost structures between an on-premise ERP and a SaaS ERP solution:
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On-premise
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SaaS Solution
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Software license
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You own it
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You rent it
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System location
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Where you want it
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You rent it
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Hardware
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Provided by you
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Included
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Software (Windows & SQL Server)
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Provided by you
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Included
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Maintenance fees
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Purchased annually
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Included
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IT Resources
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Your team or a VAR
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None required
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Support
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Purchased from a VAR
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Purchased from a VAR
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Number of users
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Unlimited
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Unlimited
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In short, an on-premise ERP requires more IT preparations and expenditures.
Upfront Costs
For an on-premise ERP, your upfront costs would be: (1) the purchase of the ERP software license, (2) the hardware, and (3) the operating system for your hardware. On the contrary, SaaS ERP has no upfront costs. SaaS ERP allows you to rent and use the ERP software through the access of their servers. This is why SaaS solutions have a much lower cost of entry than on-premise solutions.
Ongoing Costs
Once you own the hardware and software, you need to retain your own IT resources to sustain the use of your hardware and software. These IT resources may include the paying for a maintenance contract and the hiring and retaining of IT personnel to work around the clock to ensure that your system is secure and accessible.
For SaaS solutions, however, the need for IT personnel is minimal, and the burden of ensuring data security and accessibility shifts to the SaaS vendor. As the costs of ensuring data security and accessibility are shared across the SaaS vendor’s customers, the SaaS vendor can meet this burden in a cost effective way because of economies of scale.
Other Costs
If you choose a SaaS solution, you don’t need to worry about equipment depreciation and the time consuming and expensive equipment upgrades as these issues become the burdens for the SaaS vendor.
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About Servora
Servora uses cloud computing technology to deliver CRM, ERP, Accounting, and Ecommerce applications via SaaS to small and mid-sized businesses. See a list of solutions that Servora offers.
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