Has your SaaS TCO changed?
It is interesting to see how improvements in capabilities of SaaS CRM applications together with generic developments in SaaS space are impacting Total Cost of Ownership figures for SaaS CRM applications – negatively in some cases. One can see that happening at least in the following areas: Functionality, Integration Capabilities & Resource Availability.
If you were among the early SaaS CRM adopters, you were likely to have assumed that the implementation would be a simple and straight forward one with basic functionality and the associated efforts in requirement gathering, implementation, training, etc. would be minimal. While that assumption was correct then, SaaS CRM applications have been enriching the application functionality over the past few years. In some cases, arguably, I would imagine that SaaS is giving a tough competition to the on-premise CRM applications. I remember how surprised I was to find that one of the on-demand CRM applications was kind of leading when I was doing a research sometime back on the packages for a specific financial vertical - Wealth Management. The lead on-premise applications have here seems to be narrowing – with that the difference in cost of ownership figures as well.
Similarly, in the integration area, when you estimated the costs associated with integration, you probably assumed either no integration or week-end-batch kind of integration capabilities for the SaaS application. Now, the options are not limited to batch alone. In some cases, the SaaS CRM application is giving you better integration capabilities - like, for instance, with Social Networking Sites. Again, as with functionality, better integration capabilities come at a price - higher costs associated with building and maintaining them. And, hence, you have a higher cost of ownership.
With SaaS CRM vendors firmly established in the market place, we have more technical talent available now - and more System Integrators who can implement and support SaaS CRM applications. In this case, I would imagine, largely, the impact to be positive as the increase in number of skilled resources means an increase in supply and hence an eventual decrease in price. This decrease in price of resources should decrease the TCO. It is also possible that the impact is negative as there has been a sizeable increase in the number of SaaS implementations as well. With the number of implementations going up, there is an increase in demand. If this demand more than compensates the increase in supply, prices may have been pushed up - thus pushing the TCO up.
While the above considerations are not going to change the TCO calculations for the past years, I think, companies involved in the TCO analysis exercise now or in the future needs to consider them. Particularly relevant will be scenarios like revisiting the TCO numbers for an implementation which was put on hold.
Also, more importantly, let us keep in mind that higher TCO does not necessarily mean anything - it is only relative to the original TCO figure of the SaaS CRM application. It may still work out to be lower than that of the on-premise option. Needless to say, one has to consider the changes to the cost drivers of the on-premise TCO as well before a fair comparison can be made!
