Fairly Comparing the Cost of Cloud Applications to Traditional Software


As a nonprofit, comparing a subscription-based (SaaS) cloud application for finance or donor management to similar traditional installed client/server application can be confusing. 

It is easy, but misleading, to focus on licensing alone as the basis of comparison.  In fact, this is not an apples-to-apples comparison since many of the costs associated with applications installed and deployed on your local network infrastructure are hidden and not typically acknowledged as part of the total cost of the solution. 

In fact, I have heard more than one prospective client express confusion and concern about the ongoing costs of a SaaS subscription, but in the same breath dismiss the costs of servers, upgrades, remote access and other infrastructure as unavoidable.  This is easy to do if your organizational structure has those IT costs buried in an administrative budget and allocated to departments in an opaque fashion.

This kind of comparison wasn’t necessary in the past when all of the solutions being considered employed similar technology platforms and were going to be deployed in roughly the same fashion.  Back then, the only considerations were subtle differences in system requirements and pricing.  The reality is that the infrastructure and maintenance cost of traditional applications is relevant and should be factored fairly into your total cost of ownership calculation when including cloud-based applications. 

Things to keep in mind as you work through your evaluation:

  • Infrastructure isn’t free, even if it’s already there – Servers require maintenance, patches, upgrades, software and replacement.  Factoring a fairly allocated cost for the infrastructure required to deploy an on premises application is appropriate. 
  • Secure Remote Access – If remote access is required either for distributed offices or for flexible work arrangements, most traditional applications require things like web servers, VPN, Citrix and potentially other advanced networking tools, not to mention competent IT support, to be able to do so securely.  It’s assumed that in a true cloud-based SaaS environment that these costs are built into the subscription and you will enjoy secure access from anywhere at any time with no incremental cost.
  • Fit matters – No two applications address your organization’s critical business requirements exactly the same way.  No organization should choose or disqualify a cloud application just because it is a cloud application.  Capability and compatibility with your organization’s unique requirements and goals should be an overriding concern and factor into your comparison of any two systems, regardless of technology or business model.
  • The Future Matters – Sometimes the most feature-rich, capable application is also the one built on the most archaic technology platform.  If a capable system has passed its prime, technology-wise, you should expect to be subjected to a major, disruptive upgrade at some point in the future or slowly watch that application lose relevance as the march of technology pushes forward.  The viability of the technology in question both today and where the world it is likely to be in 7 years is an important consideration.

JMT has worked with a number of organizations in the very recent past where their unique circumstances made going with the cloud-based application a complete no-brainer, even though the nominal subscription costs seemed higher than traditional, locally installed alternatives over time.  In that same timeframe, we have matched organizations with those same traditional, locally installed applications because that it what made sense for that particular organization given their unique circumstances.  The important point in post is that you should not dismiss either option out of hand, but employ a fair, systematic approach to evaluating your options so that you can make an informed, deliberate decision.