Following years of many SaaS vendors pricing for growth (essentially buying business), buyers have been conditioned into assuming SaaS will always be cheaper than on-premise, and that vendors should be evaluated on price alone.

When looking to invest in a cloud-based SaaS solution it’s important to rid yourself of these preconceptions. In fact, some vendors who offer both on-premise and SaaS versions of their products are priced in a way that the Total Cost of Ownership equalizes after 4-5 years, or only works within a certain deployment size.

What’s important is to approach any buying decision with these four things in mind:

Understand where the cost-savings are most apparent: SaaS provides multiple benefits, some of which may be more important to you than others. Are you looking to save infrastructure cost or find a solution that offers greater scalability as you ramp operations in the coming six months? Perhaps it’s none of these and it’s the cost of on-site support and maintenance that’s your biggest headache?

Understand your ROI model: The metrics for defining success and measuring ROI now extend beyond simple infrastructure savings. The cheapest vendor might deliver some up-front savings but what happens to your ROI six months later when you discover that user adoption is just 10%? This is becoming a real issue for businesses who bought solely on the promise of being more agile, or reducing infrastructure costs. In reality, success demands real organizational change, not just a cheap license fee.

SaaS means service: Because many technology investments are made by the IT Department, it’s easy to overlook the more “human” element of a vendor’s service and instead get stuck in a feature comparison bake-off. If your ROI depends in any way on user adoption, engaging with a vendor that has vertical expertise will pay-off. Also – make sure your selection team comprises not only buyers, but real users.

Don’t forget the SLA: Many SaaS vendors don’t like talking about SLAs and often publish generic T&Cs online, buried deep on their site. It makes SLAs easy to forget during a negotiation. However be bold in making sure the solution will meet not only your technical requirements but your operational ones also. Typical SLA components should include service availability, maintenance periods, and support.


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