I want to share
with you a simple analysis noting differences of IT investment on SAAS and
OnPremise infraestructures. Both are in the same starting conditions, i.e.
capabilities HW / SW are similar and period is estimated in10 years.
In this study I have considered HW, SW, Staff, Training, COB, Upgrades, Inflation, ,consulting, training and support factors. For a more conservative analysis it has not been considered a decrease in prices due to increase in SAAS new customers expected in next 3 years nor to the entry of new competitors with new database technologies .
In this study I have considered HW, SW, Staff, Training, COB, Upgrades, Inflation, ,consulting, training and support factors. For a more conservative analysis it has not been considered a decrease in prices due to increase in SAAS new customers expected in next 3 years nor to the entry of new competitors with new database technologies .
In order to obtain a valid approximation of the
SAAS services we have considered a company that provides those
services and calculated the approximate amount with a public tool from
a web site and the other information has been taken from field experience.
We have not considered devaluations nor currency
depreciations.
Example, COB = 10M, then 10% 1M must be added to
your recurrent Outflow of OnPremise infrastructure (2M).
Now, total OnPremise outflow = 2M + 1M = 3M. This
figure must be compared at same Time (t) with SAAS outflow to verify what the
company priority due to current situation is.
As we can see, a break point is observed in year 5,
when a OnPremise scenario turns out to be more expensive assuming HW
replacement . I see an onCloud investment should be studied as long term
and not short term.
If you want to make a trial before long term
contract of SAAS then you can estimate your COB ( continuity of
Business) and take 10 % of the outflow and assign to total OnPremise contract with
the aim to retire in case of having obtained a disservice in first year.
I suggest use 10% in “normal” conditions, but you
can increase to 50% in social,
Economic or other stressed conditions.
Example, COB = 10M, then 10% 1M must be added to
your recurrent Outflow of OnPremise infrastructure (2M).
Now, total OnPremise outflow = 2M + 1M = 3M. This
figure must be compared at same Time (t) with SAAS outflow to verify what
the company priority due to current situation is.
We have calculated the present value of both types
of investment over a period of 10 years and the result establishes that if
you intend to migrate to technologies SAAS is best do it based on the consideration
of evidence of 10 % of the COB and gradually decreasing of expenses incurred in
the
OnPremise infrastructure.
If we observe how the cash flows are distributed
over the years and compare between them, we can check are inversely
proportional, therefore we would have lower volatility in SAAS cash flow than
OnPremise cash flow which is better for Finance Team.
It has also been observed that as IT costs
in terms of infrastructure move faster or in other words, paid faster ( cases of
weak-currency countries ) , showing the breaking point is reached sooner, specifically
in year 3 due to slower indexation of
SAAS services in US$ currency than other solutions used to
build infrastructure OnPremise in local currency and local
inventory.
A conclusion: You must go to cloud the way you prefer but do it at least three years if you want to save money
(This conslusion is personal, it does not suggest at any time make or take decisions of any person or company based on it.)
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Daniel Juvinao
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Daniel Juvinao
