Some people think that the difference between "a cloud deployment" and "a hosted service" is how the payment plan is structured. They imagine that if you have no capital outlay and just pay a SaaS usage-based monthly fee then you must be using the cloud. If only the definition of a cloud solution were that simple, there's a lot more to it than that including any definition that suits a vendor wanting to milk the current gravy-train.
This SaaS pricing seems like a nice model but it is pretty much the same model as leasing or renting a car. When you buy a car *you* are financing the capital cost of the car and you own it outright. When you lease or even rent a car someone else is financing the car and you own nothing at the end of the term, also you are eventually covering the cost of the third party financing it.
In many cases this is a great model but for enterprise software running in the cloud you might want to consider alternative models before getting out your credit card.
First let's assume that the software you are looking for is available to purchase in a conventional (non-cloud) model. Some systems are only available as SaaS offerings so you have what folks in the UK call "Hobson's Choice". If you can purchase the software licenses then there might be advantages to you buying the software outright and paying a lower fee just for the cloud hosting piece. Why?
- You may already own licenses to the software so why pay twice? Of you've already paid for the software then it might be more cost effective not to take SaaS pricing.
- It might be less expensive over the life of the project if you purchase the software outright rather than allowing the cloud provider to finance it.
- What if you want a hybrid deployment where you have some systems in the cloud and some on-premise? You'll need regular licenses for the latter anyway. This is a business case that I am seeing more frequently than I'd expected. It is driven by legacy deployments, schedule issues, geographic constraints, regulatory issues, etc.
- What if you decide to back out out cloud and want to move the entire system on-premise? This is low probability and might just be addressable "if and when".
- You might prefer Capital Expenses over Operating Expenses, (really...some US federal agencies have CapEx budget but don't have OpEx!).
Sometimes there's no option but to purchase a solution with SaaS-pricing. In the future the SaaS model might be ubiquitous but today as we transition to Cloud delivery you might want to give this some thought to the options before jumping in.