First of all, Salesforce.com's prices take the cost of customer support into account, he said. Second, while in some cases, SaaS may be cheaper for customers than on-premise software, it may not be in all, according to Wang. "It depends on how much you use it, how many people are using it."
SaaS is "really a lifestyle decision" for companies that don't want to deal with the hassle of maintaining infrastructure, he added.
Also, while SaaS vendors have been able to deliver on the promise of easier upgrades and faster innovation, there's no guarantee that this will be the case uniformly or forever, according to Wang. "We could be in the same boat one day, where SaaS vendors' margins are squeezed, and instead of doing four releases a year, they do one."
Overall, however, companies like Salesforce.com ought to offer compelling savings over on-premise software because of their built-in cost advantage, said Frank Scavo, managing partner of the Irvine, California, consulting firm Strativa, via e-mail.
"A large part of the so-called investment that traditional on-premise software vendors, such as SAP and Oracle, make in product development does not go toward new products or new functionality," he said. "Rather, it goes into porting and regression testing every product change against myriad combinations of databases, versions, server and desktop OS releases, middleware, and third-party products."
SaaS vendors can avoid many of these costs because they only need to write to their own platforms, and "therefore, they ought to be able to deliver the same functionality for lower cost," he said.
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