Many companies running NAV on-premise who are aware of Business Central have been starting to explore what it might look like to make the move. And then…they stop dead in their tracks once they understand the subscription cost of Business Central vs what they pay in annual maintenance.
Once companies reach this point, many dismiss Business Central as an option and go back to their comfort zone – they are not taking the full picture into account and potentially missing out on a great opportunity to gain important business benefits and functional capabilities in the process.
Comparing the Cost of Business Central With Nav on-premise
What Goes Into the Total Cost of Ownership (Tco)?
Out of the gates, if you look at subscriptions vs annual enhancement, you will be paying almost double – this is true. The fact is…you can’t compare the cost of what you are currently paying for licenses with the subscription licensing cost and stop there. What does it actually take to own and operate an ERP system?
For example, if you consider additional factors with running an on-premise ERP system, you’ll soon see that this figure is much higher on-premise than with subscription-based models.
Don’t take our word for it though – let’s look at the numbers. We considered 5 key cost areas when it comes to what really goes into owning an ERP solution:
• Subscription or annual maintenance
• Support services
• Full-time staff / IT staff
Let’s consider these factors in the two models below:
Business Central (SAAS)
With SaaS, you are on a monthly subscription – this means that upgrades and updates are included. However, since upgrades are mandatory, you will be required to have a plan in place to ensure that your organization can adopt new features each and every time a new release comes out.
Support services will be an additional cost when you consider enhancements, training and adopting new capabilities. However, the kind of support you will need will typically be functional and process-oriented, rather than infrastructure (i.e. servers, networks, Active Directory, etc). This is certainly the case with our support clients – we receive significantly greater requests related to infrastructure from our on-premise clients.
Furthermore, the environment and hosting fees are included in your subscription. This means that you will require fewer IT staff to ensure that things are running nicely internally. Since no one is needed to manage the backups, database or network, we’re approximating that you’ll need about 10% of a FTE IT staff member.
With on-premise, you will be paying annual maintenance fees (unless, of course, your organization has decided against doing so). This is roughly $14,000 (CAD) / year, based on a 20-user system.
Support services will be an additional cost on top of this and could include enhancements, training and adopting new capabilities, break fixes and upgrades. However, in addition to this, you will require support for your infrastructure in the event that the underlying environment or systems fail. In addition, you also need to consider disaster recovery, backups and general maintenance of servers/hardware and software updates. This requires approximately twice as much staff (20% of FTE) to manage.
Since the release cadence for Dynamics NAV / Business Central has become more frequent, Microsoft is constantly introducing new features and functions into the core product. Upgrading – we recommend every two years or so – will ensure that you are taking advantage of all of the benefits of the latest version much like you would be with SaaS, however, your upgrade must be done on your own schedule. The longer you leave between upgrades, the more costly and cumbersome they will be.
Let’s Recap. Why Does Saas Make Sense?
Based on a model we’ve put together for a moderately complex Business Central / NAV solution, we find that you’re further ahead in year one when implementing a SaaS-based model vs on-premise and in five years you will reap significant cost benefits (not to mention business benefits from new capabilities).
We’ll let the numbers do the talking but in our eyes, Business Central is a no brainer:
• More predictable costs each year. Assuming you aren’t repeatedly adding new users, you’ll see that the costs with SaaS each year are fairly consistent.
• Fewer dedicated IT staff requirements.
• Upgrades and updates included in subscription meaning you are always on the current version. You’ll never have to consider a large upgrade ever again.
Give Our Free Costing Model a Try
We’ve put together a model that considers the key cost areas mentioned above and compares the cost of Business Central and NAV on-premise over five years. We’ve included guides within the document to explain how costs should be allocated.