On-Demand vs.

On-Premises TCO Calculator

This Total Cost of Ownership (TCO) calculator provides enterprises with a framework for comparing the Software-as-a-Service (SaaS)
delivery model with the traditional on-premises model. The table below lists the various cost categories associated with the lifecycle of an
enterprise application. Due to the highly subjective nature of a TCO calculation, this should not be taken as an exhaustive list. There are
spaces within each section of the TCO spreadsheet to add other costs as required.

Cost Categories
Hardware/Infrastructure Costs associated with the necessary hardware and infrastructure to host an application in-house.

Incremental communication costs that the enterprise had to incur to utilize the application whether it
Communications fees
is on-premise or on-demand.
The capital expenditure of software licenses in the case of on-premise software and the operating
Software
expenditure of subscription fees in the case of SaaS.
Cost associated with the implementation of the application. These usually include development
Implementation
(customization and integration), testing, training, and consulting.
Management/Maintenance Cost of upgrading and administering the hardware, application, and database.

The support staff labor hours and costs, training labor and fees, travel, support contracts and
Support
management overhead.

Step One

Go to the worksheet labelled "TCO Calculator." Fill in the appropriate values for each cost category. Please note that this calculator does
not take the depreciation of capital assets or the value of the money over time into account.

Step Two

After filling in the necessary values, go to the Graphs tab to see a graphical comparison of the two models in terms of cumulative cost.
 5/28/2009 *CONFIRMED* Cumulative Costs
Year 1 = 2009 Year 1 Year 2 Year 3 TOTAL COST OF OWNERSHIP (TCO) WORKSHEET
On-Demand $58,300 $99,100 $139,900
On-Premises $96,650 $138,200 $179,750

Product X On-Demand/Software-as-a-Service (SaaS)

Year 1 Year 2 Year 3 On-Premises
Number of users (max.) 150 150 150
Subscription fee per user per month $16 $16 $16
% of Total % of Total
Year 1 Year 2 Year 3 Total ($) Year 1 Year 2 Year 3 Total ($)
Cost Cost
Hardware/Infrastructure
Servers $4,000 $4,000 $4,000 $12,000 8.6% $16,000 $4,000 $4,000 $24,000 13.4%
Peripherals $0 $0 $0 $0 0.0% $- $- $- $- 0.0%
Network $0 $0 $0 $0 0.0% $- $- $- $- 0.0%
Other $0 $0 $0 $0 0.0% $- $- $- $- 0.0%
… $- $- $- $- 0.0%
Total Hardware/Infrastructure Costs$4,000 $4,000 $4,000 $12,000 8.6% $16,000 ### $4,000.00 $24,000 13.4%
Communication
Local Area Network $- $- $- $- 0.0% $- $- $- $- 0.0%
Wide Area Network $- $- $- $- 0.0% $- $- $- $- 0.0%
Remote Access $- $- $- $- 0.0% $- $- $- $- 0.0%
… $- $- $- $- 0.0% $- $- $- $- 0.0%
Total Communication Costs $- $- $- $- 0.0% $- $- $- $- 0.0%
Software
Subscription Fees $28,800 $28,800 $28,800 $86,400 61.8% $18,750 $18,750 $18,750 $56,250 31.3%
Oracle Licenses $27,000 $5,000 $5,000 $37,000 20.6%
Other Software (Virtuozzo) $2,900 $800 $800 $4,500
Total Software Costs $28,800 $28,800 $28,800 $86,400 61.8% $48,650 $24,550 $24,550 $93,250 51.9%
Implementation
Customization/integration ($175/hr) $14,000 $- $- $14,000 10.0% $14,000 $- $- $14,000 7.8%
Training ($175/hr) $3,500 $- $- $3,500 2.5% $3,500 $- $- $3,500 1.9%
Consulting - Tech Migration $- $- $- $- 0.0% $- $- $- $- 0.0%
HW Set-Up, Config & Testing $- $- $- $- 0.0% $1,500 $- $- $1,500 0.8%
… $- $- $- $- 0.0% $- $- $- $- 0.0%
Total Implementation Costs $17,500 $- $- $17,500 12.5% $19,000 $- $- $19,000 10.6%
Management/Maintenance
Hardware & software upgrades $0 $0 $0 $- 0.0% $- $- $- 0.0%
Hardware & software admin ($130/hr) $8,000 $8,000 $8,000 ### 17.2% $13,000 $13,000 $13,000 $39,000 21.7%
Other $0 $0 $0 $- 0.0% $- $- $- $- 0.0%
… $- 0.0% $- $- $- $- 0.0%
Total Management Costs $8,000 $8,000 $8,000 $24,000 17.2% $13,000 $13,000 $13,000 $39,000 21.7%
Support
Staff training $- $- $- $- 0.0% $- $- $- $- 0.0%
Travel $0 $0 $0 $- 0.0% $- $- $- $- 0.0%
Support contracts $0 $0 $0 $- 0.0% $- $- $- $- 0.0%
Overhead labor $0 $0 $0 $- 0.0% $- $- $- $- 0.0%
Hosting Cost $0 $0 $0 $- 0.0% $- $- $- $- 0.0%
App Customization $0 $0 $0 $- 0.0% $- $- $- $- 0.0%
 Total Support Costs $0 $0 $0 $0 0.0% $- $- $- $- 0.0%

Total Costs $58,300 $40,800 $40,800 $139,900 $96,650 $41,550 $41,550 $179,750

TCO/User (150 actual users) $389 $272 $272 $933 $644 $277 $277 $1,198
Annual Cost/User $311 $399
 TCO Comparison On-Demand vs. On-Premises
$200,000
$175,000
Cumulative Cost

$150,000
$125,000
$100,000
$75,000
$50,000
$25,000
$0
Column E Column F Column G
Time

On-Demand On-Premises