COVID-19 presented enterprise-level companies with a harsh reality: either digitize their pricing operations, or risk falling behind in the global arms race to cloud computing. Businesses have responded by migrating in droves to the cloud, and IT trends reflect this: Gartner projectsthat more than 85% of organizations will adopt a cloud-first approach by 2025. As cloud-driven pricing becomes prevalent, it naturally begs the question: what is the true cost of cloud migration?
Here at Pricefx, as a cloud-native pricing software company, we have seen the challenges our customers face firsthand in the move from traditional to cloud-driven systems. In this article, we explore the cost of migrating to cloud-driven pricing software, including the challenges involved and how costs compare to on-premises solutions, so your company knows exactly what to expect when moving to the cloud.
What Is Cloud Computing and Its Role in SaaS Pricing Software
In general, cloud computing is the practice of using a remote server – and more importantly, entirely virtualized services – accessible via the internet, to store computer operations and data.
Cloud computing’s internet-based infrastructure enhances SaaS pricing software by enabling it to be more accessible and scalable, eliminating the need for costly on-site maintenance and hardware equipment. Cloud-based pricing offers more flexibility, faster price reactivity to market forces, and a smoother user experience than legacy pricing systems, which is why many companies are making the move from on-premises pricing to cloud-driven pricing solutions.
Why the Move to Cloud-Based Pricing Software Can Be Challenging
While the benefits of cloud-based pricing software are evident, a move to the cloud does not come without its own challenges. As the process requires implementing a new solution with its own distinct features and processes, it will likely be a significant upfront time commitment. However, it is also an opportunity to realign the pricing solution to address modern business needs.
From a technical standpoint, achieving full cloud integration requires rewriting and integrating a legacy pricing solution into a cloud environment; this transition period can vary widely depending on the complexity of a company’s server setup, including how many legacy applications need to be moved.
Total Cost of Ownership (TCO) of On-Premises vs. Cloud-Driven Pricing Software: Who Wins?
Now, let’s compare the total costs of ownership (TCO) of an on-premises and cloud-driven pricing solution to gain a more comprehensive understanding of what to expect once migrated.
Cost Considerations for Moving to Cloud-Driven Pricing Software
Subscription and Add-Ons
As is the case with most SaaS solutions, companies pay a recurring subscription instead of a one-time software licensing fee, which allows the flexibility to follow their growth. The subscription fee for pricing software, which is usually cloud-driven, ranges from $100,000 to $3.5 million and varies according to the agreed lease period and other variable factors, such as the state of the existing cloud infrastructure and Revenue Under Management (RUM).
As companies only pay for what they need, in some cases it will mean that each additional service requested, such as analytics or AI-driven optimization, incurs an extra cost. However, the benefit here is that businesses can add and remove features as their needs change over time, as opposed to paying more upfront for a solution that covers it all.
Integrating existing third-party systems into the cloud using APIs and other tools may be a more drawn-out process depending on what your current cloud infrastructure looks like and the level of customization needed. That said, many SaaS pricing solutions, including Pricefx, offer a flexible platform to seamlessly integrate to third-party applications.
As the cost of data transfer to the cloud may vary widely depending on the amount, this should also be considered within the TCO of a cloud-driven pricing solution. However, this is usually covered in the subscription based on the company’s data projection.
Maintenance and Upgrades
The software provider is responsible for any maintenance and upgrades needed, which lifts the burden off local IT personnel and proves to be more cost-effective in the long term.
Cost Considerations for On-Premises Pricing
With on-premises solutions, companies typically pay one large upfront sum for a software license, which tends to be significantly more than the cost of a subscription in the long term. While the benefit of this approach is a sense of ownership over the platform and the freedom to tailor it according to individual needs, the downside is the lack of flexibility that a pay-as-you-go model provides.
Hardware and Infrastructure
The operational costs for constructing and maintaining infrastructure equipment for on-prem are generally much higher than that of a cloud-driven pricing system. Companies will need to invest in a server room, networking equipment, and other hardware components to support an on-premises solution. With the cloud, there are no extra costs for housing and replacing hardware.
As mentioned, unlike the cloud, on-premises solutions involve physical equipment. The cost of electricity to power on-premises systems can tally up quickly depending on the amount of physical space needed to accommodate the hardware.
In the case of on-premises solutions, the local IT team will need to dedicate manual effort to regularly maintaining the platform rather than focus on more strategic projects, incurring significant long-term costs for companies.
In general, the cost differences between on-premises and cloud-driven pricing stem fromphysical hardware, on-site IT personnel, and the level of resources paid for at a given point. While the overall cost of either choice depends on individual business needs, cloud-driven pricing solutions are generally themost cost-effectiveoption.
How Much Does Pricing Software Cost?
The cost of migrating to a cloud-driven pricing solution primarily comes from integration and recoding efforts, which could be a significant upfront investment if your organization has many legacy applications to transfer over, lacks the infrastructure to support a cloud solution, or even just has its data in bad shape.
While migrating cloud-based pricing software does require some initial cost and time commitments, adopting cloud-first pricing pays off big in the long term.
To continue exploring the cost of pricing software, consider checking out the article below, or head over to our video.