In-Depth

Only time tells which route offers the best deal

• By Steve Ulfelder
• March 1, 2005

Finding hard numbers to support ASP vendors' claims of cost savings can be tough, which is why Gartner Inc. analyst Ben Pring says the research firm "cannot validate" those claims.

But in an April 2004 report, Gartner analyzed the total cost of ownership of several popular CRM applications aimed at mid-sized businesses. The list included ASP poster boy Salesforce.com's Enterprise Edition, perhaps the most widely embraced of the hosted enterprise applications.

For a hypothetical three-year engagement, Gartner factored in hardware, services, and software for traditional licensed CRM apps and estimated the total project cost. The widely used applications included Best Software's SalesLogix; Microsoft CRM Professional Edition; Onyx Software's Onyx Enterprise CRM; Pivotal Software's Pivotal 5; and Salesforce.com. (Gartner noted that while these products don't all have the same functionality, they are generally comparable.)

The following table shows the results, ranked from highest cost to lowest:

Onyx
3-year total: $932,877
3-year cost per user: $5,455

Pivotal
3-year total: $818,329
3-year cost per user: $4,786

Salesforce.com
3-year total: $764,201
3-year cost per user: $4,469

Microsoft
3-year total: $699,071
3-year cost per user: $4,088

SalesLogix
3-year total: $661,410
3-year cost per user: $3,868

The fact that Salesforce.com, the only ASP entrant, falls squarely in the middle, validates the observation by consultant Joel Scott of Computer Control Corp. that the break-even point on the buy-vs.-lease decision falls "somewhere in the 30-to-36 month range." Gartner broke out its costs on a year-by-year basis; if the time frame is shortened to two years, the rankings shift:

Onyx: $786,775
Pivotal: $710,465
Microsoft: $600,921
SalesLogix: $563,400
Salesforce.com: $527,326

Naturally, your mileage may vary depending on price negotiations and a host of other factors. But it appears that time horizon is the key factor in deciding whether licensing or leasing offers the best deal.

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