The Forgotten Cost in the CRM Total Cost of Ownership Calculation
Posted by Sid Lejfer on Thu, Jan 21, 2010
One of the excercises that our prospects go through when selecting a CRM solution for their business is a Total Cost of Ownership Calculation. This is a very important step in comparing an on-premise CRM solution to a Software as a Service (SaaS) solution.
In the case of calculating the cost of an on-premise solution, the obvious costs include the following:
- Allocation of the hardware cost, both for the server and end-user computers;
- Allocation of the software cost, again, both for the server and end-user computers;
- Allocation of the NOC expenses, including rent, personnel, and other related infrastruce including firewalls, security software, disaster recovery, and UPS;
- The cost of the personnel to maintain the system both from an administrative and support;
- Upgrades. Is is the most overlooked and underestimated cost of maintaining an on-premise system. There are the obvious 20% annual maintenance fee that software companies charge. But you must include the cost of the consultants and internal personnel you need to perform the upgrade. Overtime, upgrades include the upgrading of the actual software product, underlying database, operating system, and various batches required throughout the infrastructure. You need to consider down time and loss of prodcution in your calculation.
- The Aggrevation Factor. Ah, yes, the aggrevation factor. What does it cost your organization in personal and financial manpower to go through an upgrade process. Those valuable resources can be used elsewhere within your organization.
One of the advantages that SaaS provides an organization is the seamless upgrades provided as part of your subscription cost. You really need to consider this as one of your decision criteria.
Some of our clients have actually switched from an on-premise solution to a SaaS solution, cost justifying the switch by eliminating the annual maintenance and upgrade expenses.
Please go to our website at http://www.harvestsolutions.net/ and download our total cost of ownership calculator. Although it is difficult to quantify an aggrevation factor, you must include some soft cost in the upgrade process.