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.

Hardware/Infrastructure
Communications fees
Software
Implementation
Management/Maintenance
Cost Categories
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 is on-premise or on-demand.
The capital expenditure of software licenses in the case of on-premise software
and the operating expenditure of subscription fees in the case of SaaS.
Cost associated with the implementation of the application. These usually include
development (customization and integration), testing, training, and consulting.
Cost of upgrading and administering the hardware, application, and database.

The support staff labor hours and costs, training labor and fees, travel, support
Support
contracts and 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.
 Cumulative Costs
Year 1 Year 2 Year 3 Year 4 Year 5
On-Demand $55,650 $139,650 $265,650 $391,650 $559,650
On-Premises $260,000 $310,000 $375,000 $425,000 $475,000

On-Demand/Software-as-a-Service (SaaS)
Year 1 Year 2 Year 3 Year 4 Year 5 On-Premises
Number of users 50 100 150 150 200
Subscription fee per user per month $70 $70 $70 $70 $70
% of % of
Year 1 Year 2 Year 3 Year 4 Year 5 Total ($) Total Year 1 Year 2 Year 3 Year 4 Year 5 Total ($) Total
Cost Cost
Hardware/Infrastructure
Servers $0 $0 $0 $0 $0 $0 0.0% ### $ - $ - $ - $ - $ 100,000 21.1%
Peripherals $0 $0 $0 $0 $0 $0 0.0% $ - $ - $ - $ - $ - $ - 0.0%
Network $0 $0 $0 $0 $0 $0 0.0% $ - $ - $ - $ - $ - $ - 0.0%
Other $0 $0 $0 $0 $0 $0 0.0% $ - $ - $ - $ - $ - $ - 0.0%
… $ - $ - $ - $ - $ - $ - 0.0%
Total Hardware/Infrastructure Cos $0 $0 $0 $0 $0 $0 0.0% ### $ - $ - $ - $ - $ 100,000 21.1%
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
License/Subscription Fees $ 42,000 $ 84,000 $ 126,000 $ 126,000 $ 168,000 $ - 0.0% ### $ - $ - $ - $ - $ 100,000 21.1%
… $ - $ - $ - $ - $ - $ - 0.0%
Total Software Costs $ 42,000 $ 84,000 $ 126,000 $ 126,000 $ 168,000 $ - 0.0% ### $ - $ - $ - $ - $ 100,000 21.1%
Implementation
Development/customization/integrati $ 9,750 $ - $ - $ - $ - $ 9,750 1.7% $ 5,000 $ - $ - $ - $ - $ 5,000 1.1%
Training $ 3,900 $ - $ - $ - $ - $ 3,900 0.7% $ 5,000 $ - $ - $ - $ - $ 5,000 1.1%
Consulting $ - $ - $ - $ - $ - $ - 0.0% $ - $ - $ - $ - $ - $ - 0.0%
Other $ - $ - $ - $ - $ - $ - 0.0% $ - $ - $ - $ - $ - $ - 0.0%
… $ - $ - $ - $ - $ - $ - 0.0% $ - $ - $ - $ - $ - $ - 0.0%
Total Implementation Costs $ 13,650 $ - $ - $ - $ - $ 13,650 2.4% $ 10,000 $ - $ - $ - $ - $ 10,000 2.1%
Management/Maintenance
Hardware & software upgrades $0 $0 $0 $0 $0 $0 0.0% $ - $15,000 $ - $ - $ 15,000 3.2%
Hardware & software administration $0 $0 $0 $0 $0 $0 0.0% $ - $ - $ - $ - $ - $ - 0.0%
Other $0 $0 $0 $0 $0 $0 0.0% $ - $ - $ - $ - $ - $ - 0.0%
… 0.0% $ - $ - $ - $ - $ - $ - 0.0%
Total Management Costs $0 $0 $0 $0 $0 $0 0.0% $ - $ - $15,000 $ - $ - $ 15,000 3.2%
Support
Support staff $0 $0 $0 $0 $0 $0 0.0% $ 50,000 $50,000 $50,000 $50,000 $ 50,000 $ 250,000 52.6%
Staff training $0 $0 $0 $0 $0 $0 0.0% $ - $ - $ - $ - $ - $ - 0.0%
Travel $0 $0 $0 $0 $0 $0 0.0% $ - $ - $ - $ - $ - $ - 0.0%
Support contracts $0 $0 $0 $0 $0 $0 0.0% $ - $ - $ - $ - $ - $ - 0.0%
Overhead labor $0 $0 $0 $0 $0 $0 0.0% $ - $ - $ - $ - $ - $ - 0.0%
… 0.0% $ - $ - $ - $ - $ - $ - 0.0%
… 0.0% $ - $ - $ - $ - $ - $ - 0.0%
 Total Support Costs $0 $0 $0 $0 $0 $0 0.0% $ 50,000 $50,000 $50,000 $50,000 $ 50,000 $ 250,000 52.6%

Total Costs $ 55,650 $ 84,000 $ 126,000 $ 126,000 $ 168,000 $ 559,650 ### $50,000 $65,000 $50,000 $ 50,000 $ 475,000
C um ulative C ost

TCO Comparison On-Demand vs. On-Premises

$600,000

$500,000

$400,000
On-Demand
On-Premises
$300,000

$200,000

$100,000

$0
Year 1 Year 2 Year 3 Year 4 Year 5
Time