When organizations move their resources to the cloud, they no longer need to invest in the expensive hardware and software, such as server, storage, and firewalls, needed to maintain their networks, nor do they need to invest in expensive in-house teams to manage and maintain their platforms and infrastructures.

Instead, they trade capital costs, such as those associated with physical servers and data centers, for variable expenses with a pay-as-you-go system. This system also applies to the data storage space needed, which means that they get the space they need and don't pay for space they don't use.

According to The Software Report, the total cost of ownership (TCO) for an on-premise system is more than double that of a software as a service cloud solution over four years for 100 users. The report calculated the average on-premise TCO at $1,400,570 compared to $697,656 for a cloud-based solution.

The following diagram displays these comparative costs of on-premise software to the cost of a cloud solution.

This diagram illustrates that in this study, cloud solutions spent roughly 65% ($453,476.40) of their budgets on licensing while on-premise solutions only spent about 26% ($364,148.20) of their budgets. However, the cloud solution saved significantly on consulting, IT resources, and training and only spent about $244,179.60, while the on-premise solution spent $1,036,421.80 on infrastructure, maintenance, patches, IT resources, upgrades, and training.

The SaaS Industry [An Overview].” The Software Report, 6 Sept. 2017, www.thesoftwarereport.com/saas/.