Vendor’s top three reasons why renting software is 25% cheaper
Telcos that buy software as a service (SaaS) can pay 25% less in IT costs, says a report commissioned by – an SaaS vendor. Nevertheless, the research conducted by Analysys Mason at the behest of Nokia details the classic economic benefits of renting, such as lower initial investment, access to the latest models of the product and the flexibility to adapt quicker with fast advances and rapid retreats.
The main cost avoided is the traditional burden of managing software in-house, where there are many invisible costs when skills are in short supply. Meanwhile telcos can avoid the ‘opportunity lost cost’ when cloud service companies can offer economies of scale over hardware and software purchases, system management, data centre property costs, cooling systems and electricity bills.
While telecom SaaS might involve some financial sleight of hand over purchasing plans, Analysys Mason said fears over recurring monthly subscription stings are outweighed when one considers the full potential benefits of renting. In the case of the on-premise model, telcos often have to buy data centre resources every five years or so and use IT consultants regularly to manage their elaborate IT environments.
“Care should be taken to compare not just the licensing costs, but also the price of end-of-life upgrades, staffing and maintenance,” said Analysys Mason on Nokia’s website. “Telcos may gain more benefit by outsourcing the responsibility of a deployment’s maintenance to a vendor, thereby enabling internal staff to focus on improving revenue generation. This also means that resources that would have otherwise been spent on hardware can be spent elsewhere.”
Analysys Mason said it considered cost-saving benefits related to reliability, time-to-market, scalability, staff training, updates and upgrades, maintenance, IT hardware reduction and security. It also took into account opportunity costs, like improving the chances of revenue generation when reliability, time-to-market and updates improve. “Long-standing CSP pain points are also avoided,” said Justin van der Lande, Research Director at Analysys Mason, “there are no more [days lost on] planning data centre resources, testing of changes and right scaling of hardware to best meet capacity needs; these all fall to the SaaS vendor.”
Comms service providers spent 5% of their operational expenditure on SaaS in 2019, but that is expected to rise to 11% by 2023 as they execute on digital transformation projects, according to Analysys Mason. Mark Bunn, Senior Vice President for Cloud and Network Services at Nokia, said that monetisation of 5G assets is the top priority for CSPs and that renting software is not just cost-effective but it gives the CSPs the best tools and the most effective productivity.