In the rapidly advancing era of Industry 4.0, manufacturers must choose the right technology to optimize their shop floor and embrace the potential of digital transformation. While some may opt for quick-fix solutions like cloud-based SaaS monitoring systems due to executive pressure, they often find themselves disillusioned with the lackluster results and the absence of true ownership. In contrast, the perpetual licensing model stands out as a compelling alternative, offering data security and control and a lower cost of ownership in the long run.
SaaS Model: A Short-Term Solution with Long-Term Pitfalls
Many manufacturers, seeking quick wins and minimal effort, gravitate towards Software-as-a-Service (SaaS) models for Industry 4.0 implementation. However, likening this approach to joining a gym and expecting results without putting in the effort is an accurate analogy. The initial allure of low upfront costs and easy deployment can blind manufacturers to the long-term consequences of a SaaS-based system.
The true cost of the SaaS model becomes evident when calculating the expenses over a ten-year period. At $99 per machine per month, with 25 machines, the annual cost amounts to $29,700, reaching a staggering $297,000 over ten years. Shockingly, despite these significant expenditures, the manufacturer does not own any part of the software or infrastructure, making it akin to renting a service rather than possessing it.
Perpetual Licensing: The Gateway to Ownership and Lower Total Cost
In contrast, the perpetual licensing model offers a more attractive path to ownership and a lower total cost of ownership. Although the initial investment may appear higher, it pales in comparison to the cumulative expenses of the SaaS model over time. Let’s delve into the numbers for a clearer understanding.
With perpetual on-premise deployment, the licensing and deployment cost amount to $120,000 (for 25 machines) plus annual software maintenance of $12,900, totaling $129,000 over a decade. Adding these costs together results in a total cost of ownership of $249,000. While this number may seem substantial, it is significantly lower than the $297,000 spent on SaaS with no ownership rights.
Advantages of Perpetual Licensing over the SaaS Model:
1. **True Ownership**: Manufacturers gain full ownership of the software licenses by opting for the perpetual licensing model. This ownership grants them more control over customization, data security, and future upgrades, ensuring they are not at the mercy of a third-party provider.
2. **Data Security and Control**: Perpetual on-premise deployment guarantees data security within the manufacturer’s infrastructure. This level of control is particularly crucial for sensitive manufacturing data that needs to be safeguarded from potential cyber threats.
3. **Lower Total Cost of Ownership**: As demonstrated by the comparison, the perpetual licensing model proves to be the more cost-effective choice in the long term, offering considerable savings over the SaaS model, especially beyond the ten-year mark.
4. **Flexibility and Customization**: Unlike SaaS, perpetual licensing allows manufacturers to tailor the software to their specific needs and processes. This customization can lead to greater operational efficiency and productivity gains.
5. **Predictable Costs**: With perpetual licensing, manufacturers have more predictable costs, knowing exactly what they need to budget for the software and maintenance expenses without unexpected price hikes.
While the SaaS model may appear tempting at first glance with its lower initial costs and easy setup, it eventually reveals itself as an expensive and unfulfilling option in the long run. On the other hand, the perpetual licensing model proves to be a prudent investment, granting true ownership, data security, control, and a lower total cost of ownership. By committing to “own it” through perpetual licensing, manufacturers can confidently navigate the Industry 4.0 landscape, embracing the transformative potential of advanced technology while optimizing their shop floor operations.
Note to reader: The perpetual licensing model is reflective of MERLIN Tempus. Discounts on licensing increase with volume. The example for SaaS is a real-life example of a simple monitoring system costing more than a comprehensive operations management system. There is no denying the fact that there is cost justification in on-premise deployment with perpetual licensing. Furthermore, with emerging data of shocking data retention and egress charges, the scale is tipped fully in the direction of ownership and control.