Software sold as a service versus outright purchase - the truth!!

Keeping your venue up to date with all the latest technologies offered for business operations can sometimes be cost prohibitive.  In particular when it comes to upgrading or purchasing new Point of Sale solutions there are a couple of options to review to ensure it’s cost effective for your business.

There is a popular misconception out there that once you’ve purchased your POS solution you’re set and don’t require any further interaction with the vendor however this is not the case.  POS technology is constantly evolving to meet the demands of operating a business and savvy consumers.  In actual fact on-going support from the POS vendor is more important today than ever before.  Research from IBM found that the initial purchase cost, represents only 25% of the total cost of ownership over the life of the solution.

SO WHAT’S THE DIFFERENCE?

In this article we look at the differences between a POS based software solution sold as a service (SaaS) and the more traditional method of purchasing the outright licensing right to a software version.

SaaS has benefits of no upfront software purchase costs, no lock in contract period and no ongoing obligation, you are simply going onto a monthly payment plan that is easily incorporated into your finances.  With SaaS your expenditure at the time of your investment costs are aligned to your revenue flows providing a better return on investment.  If software is purchased outright there will be significant upfront license costs along with the risk you may not be happy with the solution, but are now stuck due to the substantial investment.  To put this in perspective on a 5 till site with server, upfront outright software license purchase would be approximately $10,000, as opposed to no upfront software costs with SaaS.

If purchasing outright you do have the ability to finance thus minimising the initial high investment and optimising cash flow with monthly payments. There are however significant interest implications, lock in contracts, along with penalties etc. for early opt out or late payments.  With SaaS there are no monthly interest payments, and as they are classed as a ‘monthly service fee’ they are 100% tax deductible.   In most SaaS model, you not only receive a license to use the software, but it include ongoing support, and software version upgrades, all extras when you purchase software outright.

Many POS vendors selling upfront software licenses will claim that the breakeven point between SaaS and outright purchase is 36 months which may be true if you are comparing on the software component only.  They fail to divulge that the SaaS monthly payments include upgrades and ongoing support.  If you require this with your outright purchase you will in fact need a monthly service and support contract with your POS vendor.

One of the greatest assurances a customer will receive from a SaaS provider is that because no money is paid for the software and there are no lock in contracts,  SaaS Vendors need to ensure the software delivers on what was promised and the service levels are industry leading as the customer can leave without loss of investment. “Keeping the bastards honest” is a lot more difficult when you have purchased the software outright

For more information on the Bepoz POS solution please visit www.bepoz.com.au

10th March 2016