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The Real Cost of Using Open-Source and On-Prem PSA Software

PUBLISHED: APRIL 2019

What is “Open-Source” Software?

The modern meaning of the term “open source” to describe free-access, collaborative software design was coined by technology writer Christine Peterson in 1998. Open source software is created in a decentralized way by loosely-connected individuals or teams.

A main principle of open-source software development is peer production, with products such as source code, blueprints, and documentation freely available to the public. The open-source model is most often used for projects such as in open-source appropriate technology, and open-source drug discovery.

A familiar example of open source software is WordPress.org. This popular website choice is based on open-source software. While using the WordPress software itself is free, products, services and hosting associated with using it cost money. The organization has a complicated ownership structure, but using it generally has a cost. Open-source software still has to be hosted. It can be self-hosted, on the user’s own computer hardware, or on servers rented from a cloud company, so it is common to have both open-source and on-prem software, although the two can be separate.

What is “On-Prem” Software?

An abbreviation for “on-premise”, this term applies to the computer hardware that is used to run software for an individual or a company and which are based on the premises. In the case of a company or an organization, these computers will often be held in a “server room”.

A few years ago, it was common for most offices to have a windowless room, like a large cupboard, filled with steel shelves stacked with computers gently whirring and clicking, and producing heat. But increasingly these server rooms are empty – glory holes for out-of-service laptops and spare leads.

It is becoming much more common for companies of all sizes from the smallest to the largest to base software on the cloud rather than in the office. By paying for hosting, they do away with the need to buy physical computers and to maintain them. Instead, IT specialists can focus on providing value-add services to the organization rather than previous role primarily focused on keeping the servers running and applying patches and upgrades. A key benefit of cloud is enabling a change of role for IT to be more forward thinking and focused on driving innovation.

The Cost of Open-Source PSA

There are currently no major professional services automation (PSA) solutions available through open source software. However there are various project management and workplace administration tools which offer some of the functionality of a PSA. It may be possible to utilise some of these to help manage the operations of a services business, particularly a small one. While this software would be essentially free, there would be associated costs.

1
Hosting

The software would need to be installed on computers to operate. In the case of this being done on-prem, the costs below would apply. If hosted remotely, there would be a fee for this.

2
Time and resources

Another cost would be the time spent managing these open-source tools, integrating them with other software, and developing them. That means either hiring IT professionals to do this or redirecting some of the time of existing resources to it.

3
Upgrading

If there is not a big enough group of people outside the company who are devoting time to upgrading these tools on a regular basis they will be less likely to keep up with the functionality offered by commercial PSA solutions. Some of the best PSAs are now embedding Augmented Intelligence to guide and support users to take better-informed decisions in a timely way. Trying to do this in house could be complex and costly.

4
Potential costs of non-compliance with regulation

There could be a cost to ensuring that the software complies with the appropriate regulations and laws that affect services businesses. These range from GDPR, governing data privacy, laws on working hours and pay which vary according to country and accounting standards over issues such as revenue recognition. Not complying with these rules could risk the costs of fines and so on.

5
Potential reputational costs of security breaches

Looking after the security of proprietary data and customer information would also be a potential source of cost. This is one reason that many PS organizations prefer to use cloud platforms such as Salesforce which are highly focused on security. Security breaches can be expensive in terms of money, but also in terms of reputation.

6
Opportunity Cost

There may also be an opportunity cost – according to research such as the SPI benchmark report – most high-performing and fast growing services organizations use powerful PSAs. These can help to drive improved business efficiency and revenue growth.

The Cost of On-Prem PSA

Much open source software is also on-premise.There are also a few PSA vendors who make their solution available as an an on-premise option.

1
Licenses

Where an on premise version of a proprietary PSA is selected, the services business will still have to pay a fee to use the software.

2
Hardware

Buying the hardware required is a major source of upfront cost. Plus, buying the internet connectivity required to run it and renting the space to store it are costs that will need to be taken into account.

3
Spikes in usage

PSA solutions typically see an increase in usage at the end of the month – using a cloud service enables flexible capability which goes up at these times. An on-prem system has to be large enough all the time to handle the maximum load or risk hold-ups to business operation – and that can prove costly and inefficient.

4
Maintenance

Looking after the hardware, fixing it when it breaks, upgrading it are all tasks that will have to be performed in house.

5
Upgrading, integrating

Installing upgrades will also have to be done on premise by IT staff. Integrating the PSA to other software which may be increasingly cloud-based can be a complex and time-consuming task for the resident experts. Because there are fewer PSA vendors who provide an on-prem option, it may be difficult to offer the highest level of functionality, such as incorporating AI-enabled analytics and providing mobile access.

6
Potential reputational costs of security breaches

Looking after the security and privacy of proprietary data and customer information is also be a potential source of cost for on-prem IT. This is one reason that many PS organizations prefer to use cloud platforms such as Salesforce which are highly focused on trust, security and data privacy. Security breaches can be expensive, both in terms of money but also in terms of reputation.

7
Lack of Choice

There may also be an opportunity cost to do with the small number of PSA solutions available on-prem. According to research such as the SPI benchmark report – most high-performing and fast growing services organizations use powerful PSAs. These can help to drive improved business efficiency and revenue growth. There are few modern PSAs available for on-prem.

The Cost of Cloud-Based PSA

Most of the leading professional services automation solution available today are actually cloud-based, whether that is on Saleforce.com or on another platform which is managed by the vendor.

1
Licenses

The costs of using a cloud-based Professional Services Automation solution are principally the licenses. These are paid on a monthly basis for each user of the system. Within an organization, the number of employees who will need access to the PSA varies. However it is important to ensure that service professionals have access to the system in order to keep the time and expenses information up to date.

The licenses will vary in cost according to the range and complexity of the solution chosen – a solution aimed at very small businesses which offers basic project management functionality will cost less than a solution which can be used to draw out the information to run the whole business.

2
Other devices

A cloud-based PSA is likely to be accessible on the hoof, via mobile, tablet and so on, so employees will want to have support for the range of devices they need to get the benefit of this.

3
Low-maintenance

A specialist PSA will be upgraded regularly by developers inline with customer engagement requests and making the most of technological advances. There won’t be any cost associated with maintaining or developing the software as this becomes the responsibility of the cloud service provider.

4
Time to value

The independent crowd review site G2 Crowd aggregates reviews of PSA solutions and enumerates the average time to value of each one – that is the time it takes until the PSA has paid for itself, by saving the business money and/or boosting profits.

The right PSA therefore can pay for itself by delivering real benefits to the business over a relatively short time period through things like improving the accuracy and speed of invoices, increasing the efficiency of resourcing and the rate of billable utilization, reducing revenue leakage and reducing the administrative overhead.

Clear business benefits for moving PSA to the cloud

In conclusion, evaluating the costs and benefits of the different types of PSA software requires looking at a range of factors. A major consideration will be, which PSA can bring real benefits to the business which can drive improved performance and thus deliver “time to value”?