POINT OF VIEW
Buying enterprise software is a long-term decision. Renting may be a way to reduce the risk and increase flexibility.
Whether to rent (subscribe) or buy depends on the expected lifetime of the solution and likelihood of the project being scrapped or overtaken by new technology.
- Software as a Service (SaaS) is a rental model that hides the complexity of managing a data centre, applying patches, and worrying about security.
- Platform as a Service (PaaS) does the same for the bottom (operating system and hosting) parts of the application stack.
Both have benefits and both have constraints that must be considered.
When to Buy
Buy when you have high-volume, long-term projects, or you have specific needs.
Buying a software package can deliver a good cost/benefit over the long-term. Breakeven compared to subscription is frequently achieved between years 2 to 4 for most enterprise software.
The licensing terms for subscription software can vary away from traditional compute capacity to exotic combinations that might be aligned more favourably to business benefit. This can deliver great value to lower volume users, for example licensing by seat rather than installation.
Buying software requires capital expenditure in the first year.
Responsiv can help match buying costs with likely benefits. You commit for a minimum term. We provide financing to spread the capital cost over those years – making cashflow similar to subscription.
Finding: Buying can be significantly cheaper in the longer run. It requires that you take responsibility for more of the operational load and favours larger organisations that can benefit from their own scale of demand.
Propensity to buy is diminishing due to the need to keep pace with technology advances, and the cost of management.
When to Rent (Subscription)
Subscription allows you to spread initial investments, to avoid owning software assets, and to mitigate cancellation risk
Renting or subscribing to a software package does not incur the first-year capital investment, and you cannot continue to use the software after the term of the subscription.
Subscription naturally provides a way to spread the cost of acquisition and support. It is often cheaper to start and less risky if you are not sure of the longevity or required capacity of the solution, or you expect low or unpredictable demand.
Finding: Subscription is cheaper in the short term and can offer varied ways to licence access to the solution that may better align cost to benefit.
- Rent (subscribe) when the licensing model is a better fit to your patterns of use, or when the lifetime of the solution is not known.
- Rent (subscribe) to remove first year capital costs and avoid asset costs.
Responsiv “Solution as a Service”
Responsiv Solution as a Service can deliver a hosted service that is limited to a single use-case for an annual charge. This removes the need to buy foundational software and allows Responsiv to take the delivery, operational, and hosting risks.
R-SaaS avoids you having to buy or rent a product and then build a solution. We build the solution and you rent it for a minimum term. Solution as a Service is a hosted service that delivers a solution customised to your needs.
- You define requirements.
- We discuss requirements in terms of time to deliver, cost, and value.
- We build a solution that delivers your agreed requirements
- We host and operate the solution,
- You pay an annual subscription and bask in the benefits
Making the decision
The decision to buy or rent includes the option to rent or subscribe to a full service. In considering all cases it is important to include all the elements of cost, including hosting, support, maintenance, and ongoing support and subscription costs for purchased software. The table below provides a reminder of the cost-elements to consider.
- Use experts with experience. Experience counts. Look for companies prepared to share delivery risk.
- Buying is most appropriate when there is a good fit with a long-term need.
- Rental/Subscription is better than buying for short-term needs or when the long-term is not clear. Peripheral benefits from subscription should be properly considered as a justification for long term solutions.
- Always make sure that the business value of solving the problem justifies the cost. That the solution can be integrated and managed as part of the larger estate, and consider skills and ongoing costs.
Richard Whyte has been building enterprise IT solutions for over 20 years. He is known for creating innovative practical solutions that provide a strong foundation for future development, whilst solving immediate problems. Previously the European CTO and Principal Architect for IBM Systems Middleware at IBM, he has an MBA, a degree in Statistics and Computing, is a Chartered Engineer, a Chartered IT Professional, and Fellow of both the Institute of Technology and the British Computer Society.