Adding up One Company's SaaS Savings


As I wrote last month, the tough economy seems to be increasing interest in software-as-a-service, especially among CFOs and other financial types.


No doubt quite a few organizations may believe that SaaS costs more than traditional on-premise software over the long run, as Gartner says it does. Yet many of them may still opt for SaaS over other software to reduce their short-term capital expenditures. In addition to savings on software licensing, SaaS can help companies cut costs for hardware, staff and other areas. For an interesting illustration of this, I found an Inc. article that details how exercise-equipment retailer 2nd Wind used SaaS to slice its annual IT budget from $670,900 in 2007 to a projected $259,250 this year.


Staffing accounted for one of the company's largest cost reductions. In 2007, it paid $166,500 for two full-time IT employees and $145,000 for consultants to assist with one-off projects. This year it expects to pay a single consulting company $95,000 to manage all of its SaaS-based IT systems. The cost of e-mail actually went up, from $12,000 in 2007 to the current $27,000, after 2 Winds switched to Google Apps Premier Edition. However, the company avoided what would have been a costly $300,000 upgrade of its e-mail software and servers, which were basically just limping along.


Hardware is one of the most interesting areas tapped by the company's CFO for savings. Because so many of its applications are Web-based, the CFO plans to switch from full-featured PCs to netbooks and thin-client terminals. The CFO figures this should save about $900 per workstation. This supports IT Business Edge blogger Rob Enderle's contention that netbooks seem like a great option (if bundled properly) for organizations with lots of applications in the cloud. He wrote:

Much like Apple did with iTunes and the iPod, the real opportunity for a netbook lies not in the hardware or the applications that run directly on it, but in the services to which the device connects. This may be the ideal platform for a blended mobile thin client offering, where the device is mostly connected via WAN, Wi-Fi or Wimax but has the capability to be used on a plane or otherwise disconnected in a pinch.

2 Winds now uses SaaS for its CRM and accounting, point-of-sale, and HR and payroll applications, which would surely qualify it to be featured if I ever do a follow-up to my story on Taking an All-or-Nothing Approach to SaaS.