SaaS truly allows your organization to save considerable costs. The major reasons why you will save money will be through lower IT costs, Economies of scale, and pay as you go.
Lower IT costs
When you subscribe to a SaaS application, you avoid the overhead associated with implementing conventional software. A typical software implementation involves purchasing and maintaining servers, housing them securely, and installing and maintaining the software. This requires the time and effort of experienced IT personnel and deflects the efforts of employees at a number of levels away from the core mission of your organization. According to Phil Wainewright, analyst with Summit Strategies and founder of ASPNews.com and Loosely Coupled, the cost of implementing conventional enterprise software is four to five times the cost of the original license.
Economies of scale
Subscription costs for SaaS applications reflect the economies of scale achieved by “multitenancy.” Multi-tenancy means that many customers run their applications on the same unit of software. For example, in a SaaS website calendar application, customer data is all stored in one database. This makes the overall system scalable at a far lower cost. If you’re concerned that multi-tenancy means losing control of your data, see Will I lose control of my data?
Pay as you go
When you subscribe to a SaaS application, you pay a monthly or annual subscription fee. Compared to a traditional software license, this subscription payment structure works to your advantage.
An on-going monthly expense is easier to incorporate into your budget than a large one-time outlay. You can cancel or change your subscription at any time without losing a large initial investment.
In many cases, SaaS subscriptions are based on metered usage so you pay for exactly what you use. Rather than making a long-term commitment to one fixed account structure, you can add or subtract accounts at any time as your organizational needs shift.