The real truth about cloud and on-premise costs

We, and actually almost every software company in the world, have already viewed and reviewed the “Cloud vs. On-Prem” debate, with pros and cons side by side. can read them here, if you haven’t.

The thing is: Aside from this ethereal and unspecific argument, what everyone wants to know is: How much does it really cost?
Pricing a solution is obviously a harsh and complex subject, but comparing two different and incomparable business models makes it even harder.

You know what? Let’s do it anyway!

First year

On-Premise Manufacturing Software
After eliminating the elements covered in our assumptions, the costs involved with an on-premise solution can be broken down into:
. Software licensing ($20.000 – $40.000)
. Implementation and setup costs ($20.000 – $40.000)

Those will probably be covered in the proposal you receive, ranging from $40.000 to $80.000.
What about your SQL database license? If you don’t have it or need to update it, it will also add some yearly hidden costs.

Cloud Manufacturing Software
Cloud cost calculation is rather simple and easy to do. Check our pricing table, multiply it by the number of managers you need, and multiply it again by 12 months of the year.
Let’s consider our Quality Pro Plan and three managers, $249 x 3 and you have a $747 monthly fee. Multiply it by 12 and you it’s fair to say that you will pay $8964 in the first year, no hidden costs.


Second year

On-Premise Manufacturing Software
Theoretically, after three to five years, an On-premise solution would financially pay off. But if you read all the small letters in the contract, usually there is a yearly Software update fee, corresponding to, let’s say, between 10-20% of your licensing costs. That’s a $4000 – $16000 fee.
There are also maintenance and support, and if you roughly think about 100h per year (That’s 8h per month, 2h per week) and $50 per hour, another $5000 add up to the cost.

Manufacturing Software-as-a-Service
Considering that this year will be 12 months long again… Well… that’s $747 x 12 months. You will pay $8964 again.


From the second year on, it’s pretty much the same calculations every year. Software Advice have put together a calculator of ownership costs for an on-premise vs. a Software as a Service solution. Check it here.
I think that by now you have already figured out how to do the maths.

There are some other costs that we should take into account and that usually, no one mentions:
After three or five years, is your company still on the same page, with the same goals and business model? Does your on-premise software still fit you? If the answer is no, you will have to repeat the initial investment, while with a subscription-based solution you can simply shift to another one.

If you are looking for a Cloud Solution, which you pay as you use and is flexible enough to grow with your manufacturing business, sign up now and find out our best offers.


Side note:
When trying to compare a Cloud to an On-premise Solution, it’s important to just compare similar solutions which does pretty much the same even if in different ways.
In this comparison, we are assuming that you already have a client computer, mobile devices on your shop floor, network switch, firewall, and excellent Internet connection, regardless of whether the system is on-premises or in the cloud. We are also ignoring the tax implications between cap-ex or op-ex, and assuming no extraordinary maintenance costs or integrations between the software and a specific machine since this would add up to any of the solutions.