This Yankee Group White Paper, compliments of NetSuite, shows how on-demand applications can significantly reduce cost vs. on-premise applications. See how to reduce the total cost of ownership (TCO) of deploying & integrating CRM & accounting/ERP applications.
Yankee Group DecisionNoteSM Technology Analysis June 1, 2005 by Sanjeev Aggarwal, Small & Medium Business Strategies Senior Analyst, saggarwal@yankeegroup.com, 617-880-0246
TCO of On-Demand Applications
Is Significantly Better for SMBs YANKEEGG RR OO UU PPand Mid-Market Enterprises Decision Point: Optimizing the Applications Delivery Model for the SMB and Mid-Market Enterprise The Bottom Line: The TCO for on-demand solutions is much better than that of traditional on-premises solutions even when evaluated over a 3- to 5-year period. On-premises solutions require significant investments in IT infrastructure and application deployment, support and update resources. Who Should Read: CEO, CIO, CMO, marketing, sales, product management, business development Telecommunications Global Practice Leader: Rob Rich, rrich@yankeegroup.com, 617-880-0282
On-Demand Application Solutions Are a Disruptive Technology To capture more SMB and mid-market enterprise wallet share, some upstart application vendors are offering viable alternative delivery and pricing models that provide end users with enterprise-level capabilities they can implement rapidly and more affordably without additional IT infrastructure or staff. A careful investigation of the various options can lead to a significantly better TCO for deploying a business application solution. It's imperative for enterprises to understand how on-demand solutions are changing the IT landscape in SMBs and mid-market enterprises. In his book, The Innovator's Dilemma, Clayton Christensen describes disruptive technologies in the following way: most technologies are "sustaining," in that they incrementally improve the price or performance of a particular product or service over time. But disruptive technologies dramatically reduce the price or performance of a particular product or service and create a new path. These disruptive technologies are pernicious because most vendors that are sustaining their products or services can't immediately adopt the new path since it changes their whole economic model. The on-demand applications delivery model propagated by vendors such as Salesforce.com and NetSuite can disrupt giants such as Siebel, as seen in its recent financial results. Siebel now offers Siebel CRM OnDemand, which targets the IT-constrained mid-market enterprises. As described in the May 2005 DecisionNote, Appeal for On-Demand Solutions Is Expanding, almost 50% of medium businesses and mid-market enterprises want on-demand solutions for accounting/finance, CRM, inventory management, merchant services and CRM.
What Does the TCO for the On-Demand Model Include? The TCO for on-demand models should include the following 3- to 5-year costs for functionally similar solutions: . Subscription costs versus license costs for an equivalent number of users . Application support and maintenance costs . Implementation and customization costs . Host server computers, storage and maintenance costs . Internet access costs . End-user technical support costs . End-user IT support personnel requirements . User training costs
SMThis Yankee Group DecisionNote is published for the sole use of Yankee Group Decision Service subscribers. It may not be duplicated, reproduced, or retransmitted in whole or in part without the express permission of Yankee Group. All rights reserved. All opinions and estimates herein constitute our judgment as of this date and are subject to change without notice. For more information, contact Yankee Group, 31 St. James Avenue, Boston, MA 02116. Phone: (617) 956-5000. Fax: (617) 956-5005. E-mail: info@yankeegroup.com. TCO of On-Demand Applications Is Significantly Better for SMBs and Mid-Market Enterprises June 1, 2005 TCO Calculation For this example, we evaluated a solution that provides a broad range of functionality (see Exhibit 1. Exhibit 1) for the mid-market user's front- and Features and Functions for Medium and Mid-Market back-office needs. We evaluated an on-demand Solutions solution versus an on-premises licensed solution. NetSuite offers the combined functionality of Customer Relationship Management Enterprise Resource PlanningMAS90 and SalesLogix Advanced from Best Salesforce Automation (SFA) General LedgerSoftware, and it's available as an on-demand delivered solution. S ales Order Entry A ccounts ReceivableBecause the two solutions offer similar features Customer Support Self-Service A c... [download for more]
