Total cost of ownership comparisons

This thread has grown out of the longer Cloud business case thread, where it was suggested that some of the individual elements deserved closer scrutiny in their own right.

To get things rolling, here are some summary points from comments on the previous thread:

• Hidden costs are the leveller "WhyNot" argues that web app costs include far more than an outright purchase, including ongoing upgrades to the software and automatic backups (purchase of device/media, time costs to backup & restore etc). "Work out the additional cost of the aforementioned areas & add it to the cost of the desktop app." Cloud sceptic Chatman suggested that a copy of VT Accounts costs £125 and could last as long as 10 years. "But how often will he have to reload the app on another PC over his 10 year span (not to mention changes in the operating systems which may render the app useless). The time costs for installing OS upgrades should be added to the purchase price. At £50+ per hour for a professional, having to spend time troubleshooting their own IT problems is likely to wipe out any desktop savings, WhyNot concluded.

• Some TCO comparisons and other documents (from David Terrar), which cites:
  - Comparing The ROI Of SaaS Versus On-Premise Using Forrester’s TEI™ Approach (RayWang, Forrester 2006)
  - Software-as-a-Service;A Comprehensive Look at the Total Cost of Ownership of Software Applications (SIIA 2006)
  - nGenera Achieves 589% ROI with Intacct Financial Management Software (Nucleus)
  - The TCO of Cloud Computing in the SMB and Mid-Market Enterprises: A total cost of ownership comparison of cloud and on-premise business applications (Hurwitz & Associates on behalf of NetSuite)
  -  TCO Comparison Analysis Salesforce.com vs. Siebel On-premise vs. Siebel On-demand 
   
• Benefit, time & cost savings & "good fit" Some businesses (such as ecommerce traders) will be better positioned to reap the benefits, pointed out "onlinebeancounter" - "The accounting is an automatic flow through to the back end. Namely, sales are recorded, inventory relieved and on hand stock updated as well as payments received via credit cards or A/R setup up. All with a click of the mouse by the customer."
   
• Software developer David Forbes and chatman posed several challenges for the Cloud enthusiasts, asking to be convinced by some tangible numbers. Forbes looked into a Citrix case study involving 5 servers that required 24/7 access and felt the evidence showed the cloud option at a disadvantage ( $35K vs $7K per annum). "The cost to the software company is developing, distributing, supporting," he argued. "Are these costs any different for a piece of software you download and install on your computer compared with something you run in a browser? Maybe the debate should centre on the relative pros and cons of the two technologies rather than what the vendor charges."
   
• Industry analyst Gartner has also been willing to question the Cloud industry's claims in the TCO debate. A study called Fact-Checking: The Five Most-Common SaaS Assumptions that BusinessCloud9.com reported on in February found that SaaS was cheaper during its first two years of use, but the total cost of ownership over five years would be lower for on-premises software.

Let the debate continue here! In particular if you are an accountant or software user who can bring forward evidence from your own experiences, you could help provide some important evidence to give Cloud suppliers and potential users a meaningful frame of reference.
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John Stokdyk, Technology editor