Why pay escalating prices to maintain on-premise business apps?

Business applications are indispensable in today’s enterprise landscape. They help companies manage supply chains, handle accounts, perform marketing and support functions, and provide HR and Payroll administrators with the tools to do their job efficiently — to name just a few uses. Organizations that rely on these solutions usually have to pay annual maintenance fees, which cost about 17–18% of the original cost of the software licenses themselves. These periodic fees generally cover updates, security patches, new features and other improvements, and have escalated in recent years to as high as 22%.

With companies under pressure to cut their spending in the current economic environment, many CEOs and CIOs are taking a closer look at their recurring expenditures — such as the annual maintenance fees for hosted on-premise business software. Oftentimes, the software maintenance costs far outweigh the incremental benefits that they get, and can even add up to nearly the amount of new software licenses. These cost pressures may lead organizations to make do with older versions of their on-premise applications, which have less functionality and security controls. Some companies that have laid off employees are also cutting down on software licenses to reflect the reduction in headcount; others are simply stopping their maintenance contracts and choosing to brave it on their own, or rely on updates from cheaper third-party vendors.

A cloud-based model makes economic sense

In the current economic situation, these escalating costs have made many executives take a keen interest in business software that’s delivered through the SaaS model, including cloud-based time and attendance tracking software.

Since cloud-based solutions generally charge a flat annual per user fee, companies get to save even more by avoiding the typical ~22% annual maintenance fees charged by major enterprise solutions vendors. With their free and seamless updates, companies that adopt cloud solutions always stay current with security and compliance requirements, while getting all the benefits of product upgrades and functional improvements. It’s not surprising, then, that the cloud-based model is becoming the preferred way that organizations buy and use their business applications.