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Accounting Software TCO

In addition to software licensing and cloud subscriptions, there are multiple costs involved when acquiring accounting software that need to be considered to holistically calculate the total cost of ownership (TCO).

  • Software
    • On-Premise & Hosted Platforms: software licenses need to be purchased for each user (capitalized expense), and there will be an annual maintenance cost that is usually about 20% of the licensing costs (maintenance expense). Software for new servers purchased for the accounting software will also have purchasing and maintenance costs to consider.
    • Software-as-a-Service (SaaS) & Cloud Platforms: user licenses and subscriptions need to be purchased, and they vary as either a monthly fee (Microsoft Dynamics GP) or an annual fee (Intacct).
  • Hardware & Networking
    • On-Premise Platform: to install the software onsite, you will need to purchase the hardware (capitalized expense), and there will be a cost to maintain it (typically at a cost of 20% of the original purchase price per year). Depending on the current status of the network, you may or may not need to purchase new equipment.
    • Hosted, SaaS, & Cloud Platforms: the Hosting provider owns the hardware and takes care of all maintenance, therefore, you just pay for access to the software (via monthly user licenses or annual users/subscriptions licenses). The Host and SaaS provider will usually charge an initial one-time setup fee. Determine whether or not you will need to upgrade your internet connection or purchase an internet connect from more than one provider. If you are located in a rural area, determine your access to the desired high-speed internet connection.
  • Implementation, Training, & On-going Support
    • On-Premise & Hosted Platforms: the on-premise platform includes setting up any new hardware that was purchased, installing the database engine and accounting software with its supporting software on the appropriate servers, workstations, laptops, and other devices. Some Host providers will do installations and include it in their cost to you. In your ownership estimation also include the software setup and implementation, the data migration, the training, and on-going support.
    • SaaS & Cloud Platforms: you will not have to install the software on these platforms. However, other costs to include are the software setup and implementation, the data migration, the training, and on-going support.
  • Customizations & Integrations
    • On-Premise, Hosted, SaaS, & Cloud Platforms: for all four platforms you will need to determine the cost of developing customizations and creating integrations between the accounting software and non-accounting software.
  • Hardware & Software Upgrades
    • On-Premise Platform: estimate the future date the hardware will need to be upgraded and the associated cost. New versions of the software are available to you when you are current with your annual maintenance renewals.
    • Hosted, SaaS, & Cloud Platforms: check with your Host provider to determine the upgrade process and the associated costs. SaaS and Cloud platforms will perform the upgrades.
  • Backups & Disaster Recovery
    • On-Premise Platform: determine the cost of the backup hardware and software, and the time it takes to move the data to an off-site storage.
    • Hosted, SaaS, & Cloud Platforms: verify that the provider has a certified backup and disaster recovery process.
  • Personnel & Professional Services
    • On-Premise & Hosted Platforms: estimate the time and associated costs for both company personnel and out-side professional services (include travel expenses) to setup the hardware, install the software, implement the software, train company personnel, maintain customizations and integrations, perform hardware and software upgrades, and on-going support. Software upgrades will include service packs and new versions of the accounting software. You will need to estimate the timing of the upgrades (approximately every 2 to 5 years for new versions). Check with your Host provider to determine their costs to you.
    • SaaS & Cloud Platforms: estimate the time and associated costs for both company personnel and out-side professional services (include travel expenses) to implement the software, train company personnel, maintain customizations and integrations, and on-going support.
  • Other
    • On-Premise Platform: other costs could include improving your internet connections, upgrading the network infrastructure, purchasing new servers and workstations, and changing business processes to use new functionality provided by the new accounting software or its integration with other non-accounting software.
    • Hosted, SaaS, & Cloud Platforms: other costs could be changing business processes to use new functionality provided by the new accounting software or its integration with other non-accounting software.
  • Exit Strategy
    • On-Premise Platform: to keep your historical data in the software, you will need to estimate the cost of both the hardware and personnel to keep the accounting software working. If you want to export your data and you do not plan to keep the old software, determine the feasibility of not keeping it.
    • Hosted, SaaS, & Cloud Platforms: to keep your historical data in the software, you will need to contact your provider and obtain the archival cost. If you want to export your data and you do not plan to keep the old software, determine the feasibility of this option with your provider. Verify with your provider that you own your data.

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