SaaS or On-Premise: Visible Costs vs. Hidden Costs

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We have seen in our previous article on the subject, the advantages and disadvantages of SaaS and On-Premise solutions.

The cost of licenses is clearly a feature in a comparison between a SaaS solution (Cloud) and On-Premise, but the study of the costs of licenses alone is insufficient; it is the entire TCO (Total Cost Of Ownership) of the solution that needs to be taken into account – including the hidden costs.

The iceberg… a TCO comparison of a solution

The following diagram is a useful aid to comparing the TCO of a solution on SaaS versus On-Premise: The iceberg…

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On a purchase order, only the tip of the iceberg is visible. The submerged part, representing the hidden costs, is not. The size of this second part is however very different depending on the hosting solution chosen.

In the case of SaaS, the visible tip of the iceberg (licenses) is the biggest part. Indeed, there are no hidden costs in respect of; hosting and maintaining servers, no staff costs responsible for maintaining servers, no hosting costs, no DR VMs, no investment in storage arrays or in the network … All these expenses are borne by the SaaS provider and reflected in the license costs.

The only remaining charges, which are the same in an On-Premise installation, are in the training of the users and the consultancy in initial implementation of the purchased tool.

On the contrary, the On-Premise solution will introduce many more important hidden costs. What is the cost of an internal or external system and network administrator spending time deploying and maintaining VMs? What is the frequency of version upgrades of the tool? How long does it take to upgrade? Should this be done by the supplier and at what cost? What happens if there is a change in the operating system upgrade needed to continue to support the solution? What is the cost of migration? All these questions require answers and up-front costings; often difficult to measure, but essential nonetheless.

In conclusion

A thorough study of the long-term costs (at least 3 to 5 years) is essential to make an informed choice between the 2 offers (proposed by the same supplier or via an RFP). The importance of hidden costs is a significant variable to consider and accurate estimation is essential.

At Coservit, with our ServiceNav solution, we offer the two approaches: SaaS or On-Premise to leave the choice and correspond to all the constraints seen in the article “Monitoring in SaaS or OnPremise mode? “.

Whether in SaaS mode or On-Premise mode, we have always worked and our work is always moving in this direction, to have the most packaged solution possible while respecting the essential security elements.


UK ServiceNav Product Development Manager; my priority is to be needful of the particular requirements of all ‘English-speaking’ markets where ServiceNav is sold. I have over 20 years experience of the IT monitoring field - covering a wide variety of products and technologies.

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