Gartner: Don’t assume SaaS is cheaper

IT managers should not assume that software as a service (SaaS) is cheaper than on-premises software, according to Gartner Inc.

The analyst firm said that there has been a “great deal of hype” around SaaS and that businesses had misconceptions about its cost.

SaaS is cheaper during its first two years of use, Gartner said, but the total cost of ownership over five years would be lower for on-premises software. Part of this was from an accounting perspective, because the capital assets for the software would depreciate.

Calling for businesses to have a “reality check” on SaaS, Gartner analyst Robert DeSisto said, “The concern is that some companies are actually deploying SaaS solutions, based on these false assumptions.”

In its report “Fact-Checking: The Five Most-Common SaaS Assumptions,” Gartner also warned that SaaS was not necessarily faster to implement. While vendors quote 30 days as the normal implementation time, some software still takes up to seven months to set up, it said.

Businesses are equally wrong to assume that they'll be billed according to usage, Gartner said. In “the vast majority of cases,” it explained, companies were pushed to sign predetermined contracts with fixed fees.

But companies also underestimated SaaS, the report stated. Many felt they could not integrate the software with on-premises applications or data sources. But data could be initially loaded to the SaaS application, then updated regularly or updated in real time using Web services. In addition, Gartner said, businesses need to remember that SaaS applications can be customized and are no longer only for basic functions.