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Gartner Warns on SaaS's Hidden Costs

Feb 24, 2009, 00:02 (0 Talkback[s])
(Other stories by Richard Adhikari)

"Adopting Software-as-a-Service (SaaS) might be widely seen as a way for enterprises to cut costs and speed deployment, but things may not always be as they seem, according to industry analyst firm Gartner.

"Robert DeSisto, an analyst at Gartner, agreed that SaaS applications have a lower total cost of ownership (TCO) for their first two years because they do not require large capital investments for licenses or support infrastructure.

"However, they lose that advantage from an accounting perspective beginning in the third year of a deployment, he said. That's because on-premises applications depreciate as a capital expense, while SaaS applications are booked as operating expenses and cannot be depreciated."

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