The Real Cost of SaaS

Software as a Service

SaaS, or Software as a Service is being hailed as the greatest thing since slice bread. It’s got loads of advantages over it’s traditional desktop equivalents. For developers and entrepreneurs it’s a dream business model, but for consumers it can actually end up burning quite a large hole in their pocket, especially if they need to use more then a few services at once.

To highlight this I’ve done a little test to see much it costs to run all my favourite SaaS services with an average paid account.

Right now, I use 10 online services that I either pay for or expect to pay for at some point in the future. These are:

Not all of these pricings are based on a yearly or monthly charge, so lets make some assumptions:

  1. That on Campaign Monitor I’ll send 12 newsletters a year to 200 people ($5x12x$2.00=$120)
  2. That I need 3 Google App accounts ($50×3=$150)
  3. That I need to remotely manage 4 servers on LogMeIn ($69×4=$276)

Now lets add it all up.


Monthly Cost

Annual Cost

Freshbooks $24 $288
Campaign Monitor $10 $120
Google Apps $12.50 $150
Lighthouse $24 $288
LogMeIn $23 $276
Remember the Milk $2.08 $25
Springloops $32 $384
Basecamp $49 $588
GRAND TOTAL $176.58 $2,119

So that’s $2,119 per year for all the online software I need to run my personal life and my small business. Is this an acceptable cost? Probably. But the few dollars a month really add up once you start to use more then a couple of services.

Compared to the licensing costs of Windows XP and Microsoft Office (which are one off’s) these costs are seriously high, so although SaaS provides new and exciting opportunities it can also be expensive compared to traditional software solutions.

So the lesson here has to be that before deciding to pay for a subscription based SaaS service, make sure you’re 100% confident you need it for your business. Otherwise it could end up costing you more then you expected.


4 Comments added. Add comment?

  1. Donal says:

    I think you are being a little disingenuous Iarfhlaith. Many of the software services you mention have free versions or staggered pricing plans depending on usage. With the current exchange rate on the dollar being so attractive the cost of the SaaS products listed is around €1500, although mileage may vary on this fringe benefit in the future.

    I use five of the SaaS products mentioned above:

    Logmein has an amazing free product with an unlimited number of free accounts allowed and offer many discount plans for purchasing multiple licenses of their paid products. They also allow you to swap your paid licenses between as many PCs as you wish.

    Freshbooks has a free product (only 3 clients), and they offer staggered price plans. They also have a one click referral process which earns me money or commission if I sign up new users.

    Goosync has a free product which I use and they offer the opportunity to become an affiliate and earn discounts and commission, although at present the application process is needlessly complicated.

    Google Apps has by far the best free product on the market. We use the free version on our own domain with 6GBs of mail storage per user and unlimited user accounts. I was more than willing to pay Google the €50 per year for the paid version, but found it too inflexible to use regarding adding email aliases. Short answer: you can’t have them without paying for a new account for each one. This bug (feature?) may change with new iterations.

    Basecamp has a full featured free product, again with staggered pricing. We have occasionally had use for the the paid version, upgraded temporarily, and then dropped back to the free version when a particular project was complete.

    Finally, and for me most importantly, money spent on SaaS products is not ‘wasted’ or ‘dead’ money. In the past a software purchase for your business was approaching obsolescence the moment the license activation code was entered. Some new product or killer feature would emerge in the next version, the next upgrade. With SaaS you invariably have the newest version, with the latest features and upgrades delivered seamlessly to the user.

    If Google does not become the unstoppable behemoth (too late!) in this emerging sector it will be interesting to see the price savings that can be made when real competition emerges amongst companies delivering similar products. I think this will shake out first in online backup with companies like Carbonite, Mozy, Sugarsync and others already offering some great deals on storage and others like Putplace and Dropbox emerging with slightly different products and approaches.

    Sep 10, 2008
  2. Iarfhlaith says:

    Donal, I take your point, most of these services can be used for free up to a point. But my argument is based on the long term costs. Having a free account is fine to trial the service but to really use it over an extended period of time, you’ll have to at some point put your hand in your pocket.

    I think I was pretty fair with the charges I quoted, using only the middle package option wherever possible. Although I concede that the currency exchange rate at the moment helps to make these rates look more attractive.

    Finally, I never suggested that spending money on SaaS services is ‘wasted’ or ‘dead’ money. Like you, I agree that the SaaS model is less risky then traditionally licensed software because typically it’s charged ‘pay as you go’ and you can leave any time with no penalty.

    Thanks for the feedback to the post though, maybe I should have been more clear that free versions are available, even if they are severly restricted in many cases.

    Sep 10, 2008
  3. Donal says:

    I think the long term costs of SaaS versus savings on equipment, maintenance, manhours etc., will be an interesting debate to be had. Personally, I think the small business server market of say 5-25 users is where much of the SaaS demographic will initially come from. Those are the businesses who will benefit most from services like online backup and Google Apps.

    Free versions are great to dip your toe into the water and in some cases are all a user needs. I also like the pay as you go model, but what would really put my mind at ease is a universal “Download My Data in an Accessible Format,” button to mitigate against any of these numerous startups going bust. In fairness some companies do provide this, but it would be a useful feature to entice more customers into the ‘Cloud’.

    Sep 10, 2008
  4. Iarfhlaith says:

    I completely agree. And in fairness to the majority of SaaS providers out there, they do allow data to be exported. Often in Excel format. As for multimedia files, this is probably a more difficult ask. Thankfully, the notion of a walled garden hasn’t been adopted in the same manner by the SaaS community as it has by the social networks.

    Incidentally, I’m heading to a ‘Cloud Computing’ event at the Google EU headquarters later this month. Might give a better insight into their plans for the future within this space.

    I’ll keep you posted.

    Sep 10, 2008

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