What is SaaS?

SaaS is a way of delivering software applications over the internet, providing access to always-current technology without the need for complex installations or on-premise infrastructure.

Instead of purchasing and maintaining software on individual servers, organisations subscribe to SaaS, paying a predictable fee for access, support, security, and ongoing software updates.

At TechnologyOne, our SaaS platform and SaaS+ delivery method enable organisations to access mission-critical products while reducing the costs and complexities typically associated with traditional software deployments.

What are the benefits of SaaS?

Moving to SaaS offers clear advantages for organisations looking to modernise their operations.

The right SaaS solution can:

• Reduce upfront costs with predictable subscription pricing.
• Enable faster deployment with applications ready to use quickly.
• Handle automatic updates and maintenance for you.
• Scale easily as your organisation’s needs change.
• Provide secure access from any device, anywhere, at any time.
• Strengthen security and compliance across your operations.
• Free up your teams to focus on higher-value work.

What is ERP?

Enterprise Resource Planning (ERP) software brings your organisation’s core processes together in one place, from finance and procurement to asset management, supply chains, and HR. ERP software is a key step for organisations looking to improve efficiency and service delivery while keeping control over data and compliance requirements.

By using a SaaS-based ERP, organisations gain the benefits of streamlined processes, real-time insights, reduced administrative burdens and more.

What is ROI, and why is it important for SaaS investments?

Return on investment (ROI) measures the financial benefit gained from an investment compared to its cost. For SaaS, ROI helps organisations understand the value received from subscription fees by weighing them against the savings, efficiencies and improvements delivered by the software.

Calculating SaaS ROI ensures your organisation can secure stakeholder support for the investment and track whether the software is delivering on its promise to improve operations while cutting costs. It also helps build a clear business case for moving to SaaS for other key departments or processes in the future, especially if you can show an increase in productivity.

SaaS ROI statistics

Recent studies confirm that SaaS investments deliver strong returns for most organisations. Research by Nucleus found that cloud-based ERP deployments deliver around four times the ROI of on-premise systems, with many organisations seeing a return of up to $3.86 in value for every $1 spent.

Other studies show that the average ROI for ERP projects sits around 52%. In comparison, many SaaS ERP implementations achieve over 150% ROI once fully embedded, driven by reduced IT costs, process efficiencies and the ability to reallocate resources to higher-value activities.

Globally, approximately 80% of SaaS ERP projects (around four out of five) meet or exceed their ROI expectations. These figures highlight why SaaS ROI is such a critical measure, giving organisations confidence that the benefits of adopting cloud-based systems extend well beyond subscription costs.

Key factors to consider when calculating SaaS ROI

Calculating the ROI of SaaS involves more than simply weighing the monthly subscription cost against immediate savings. To truly understand the value of SaaS for your organisation, it is essential to consider a range of factors that influence both the cost and the return on investment over time.

These factors include:

• Total cost of ownership (TCO)
• Expected time-to-value (TTV) and the payback period
• Revenue growth and cost savings from SaaS adoption
• Increased operational efficiency and productivity
• Customer satisfaction and retention improvements

Each of these areas can have a significant impact on your organisation’s SaaS ROI, and taking the time to evaluate them will help you build a stronger business case for transitioning to SaaS.

Total cost of ownership (TCO)

Total cost of ownership (TCO) measures all the costs associated with owning and managing software over its lifecycle, including licensing, infrastructure, maintenance, upgrades, and support. It helps organisations understand the true long-term cost of their technology investments beyond initial purchase or subscription fees.

These savings are a crucial part of the ROI calculation, as one of the most common misconceptions about SaaS is that it will incur significant upfront costs.

However, research by IBRS and Insight Economics, commissioned by TechnologyOne, found that reducing TCO is one of the largest areas of benefit when moving from on-premise systems to SaaS. In fact, TCO savings account for around 32% of the benefits on average when organisations make the shift, freeing up funding that can be redirected to higher-value projects and priorities.

By reducing the need for large capital outlays on hardware and the ongoing expenses of managing and maintaining on-premise infrastructure, SaaS can deliver clear and measurable cost savings.

Read the full report here.

Expected time-to-value (TTV) and the payback period

Time-to-value (TTV) measures how quickly your organisation starts seeing benefits after moving to SaaS, while the payback period tracks how long it takes for those benefits to cover the investment. Both are important when calculating SaaS ROI, as they reflect how quickly value can be realised and reinvested back into the organisation.

SaaS can significantly shorten these timelines. Industry research shows that cloud ERP deployments recover costs up to 2.5 times faster than on-premise systems, thanks to faster implementation, lower infrastructure requirements, and access to continuous updates.

Many organisations achieve payback in under two years, while most SaaS ROI is realised within two to three years.

Revenue growth and cost savings from SaaS adoption

SaaS can support revenue growth by giving teams faster access to data, improving decision-making, and enabling more responsive service delivery. At the same time, it reduces costs by eliminating on-premise infrastructure and ongoing maintenance expenses.

Research shows that SaaS deployments often deliver ROI by helping organisations redirect resources towards growth and innovation.

Increased operational efficiency

Operational efficiency is a core driver of SaaS ROI, helping organisations simplify processes, reduce manual workloads and enable teams to focus on higher-value activities.

Our research with IBRS and Insight Economics also found that labour force productivity accounts for 54% of the benefit potential when moving from on-premise systems to SaaS.

“Critically, labour productivity represents an increase in output capacity for a given level of labour inputs; this allows organisations to meet growth in demand without expanding staff levels compared to what would have been required if a traditional on-premise software strategy had been continued,” the report states.

Customer satisfaction and retention improvements

Improved customer experiences are another contributor to SaaS ROI. By providing faster, more reliable services and enabling self-service options, SaaS helps organisations meet customer expectations and build trust.

Better access to accurate, real-time data also allows teams to resolve issues quickly, strengthening relationships, and supporting long-term retention.

How to calculate SaaS ROI

There is a simple formula for calculating ROI on a SaaS implementation:

You can also express it more simply with (net profit/total cost of ownership) x 100. Unfortunately, while the formula is simple, getting the numbers it requires isn’t as straightforward.

To use this formula effectively, you will need to capture:

• Total SaaS costs: including subscription fees, implementation and training costs, integration, and any change management activities.
• Revenue or cost savings: from increased operational efficiency, reduced infrastructure and maintenance costs, and any new revenue generated through improved customer experiences or services.
• Timeframe(s): typically measured over one to three years to align with your expected payback period and time-to-value.

It's also a good idea to track ‘soft’ benefits, like improved employee satisfaction and customer retention, which contribute to ROI even if they are harder to quantify immediately.

For example, Mornington Peninsula Shire surveyed employees after implementing TechnologyOne’s Human Resources & Payroll, and 87% rated the new system as either ‘good’, ‘very good’, or ‘excellent’, which greatly improved staff’s day-to-day experiences.

By using this approach, you can build a clear and measurable business case for SaaS, ensuring investments are aligned with your broader goals.

Tools and resources for calculating SaaS ROI

Popular SaaS ROI calculators, such as PayPro Global SaaS ROI Calculator and Mailmodo SaaS ROI Calculator, allow you to input costs, projected savings and timeframes to generate clear ROI projections. These SaaS ROI calculators can help your organisation quickly estimate the return on your SaaS investment in a structured way to balance the benefits against costs.

Using these tools can save time and reduce errors compared to manual calculations. However, having an experienced finance team involved remains crucial. They can ensure calculations reflect your organisation’s unique costs, operational goals and accounting structures, helping you build a robust business case for SaaS adoption.

If you aren’t sure whether a SaaS ERP implementation would be cost-effective for your business or department, you can contact one of our expert team members who’d be happy to walk you through it.

Common pitfalls when calculating SaaS ROI

Calculating SaaS ROI can provide valuable insights, but there are common pitfalls that can affect the accuracy of your projections if not carefully managed:

• Overestimating benefits
• Overlooking hidden costs
• Focusing only on short-term gains
• Choosing the wrong SaaS provider

Being aware of these pitfalls will help your organisation approach SaaS ROI with clear assumptions, ensuring your analysis supports informed decision-making and aligns with your long-term goals.

Overestimating the benefits

It can be easy to overestimate the benefits of SaaS when building your business case, especially if initial projections are based on best-case scenarios. Factors like slower-than-expected user adoption, unforeseen integration challenges, or changes in business needs can reduce the speed or scale of those expected benefits.

To avoid overestimating, base your ROI calculations on realistic assumptions, using data from similar projects where possible. You should also model for multiple different scenarios, including a worst-case scenario where hardly anything goes according to plan.

This will help you build a credible case for SaaS that aligns with your organisation’s ability to implement and adopt new technology effectively.

Don’t forget the fees!

When calculating SaaS ROI, it is important to include all costs that contribute to your total cost of ownership (TCO). Key fees to consider include:

• Implementation fees: Upfront costs to set up and configure the software.
• Training expenses: Costs of training staff to use the new system effectively.
• Support costs: Charges for premium or extended support services.
• Integration costs: Expenses to connect the SaaS product with your other systems.
• Data storage fees: Additional charges if you exceed the included storage limits.
• Customisation costs: Fees for tailoring the software to your specific processes.

Including these fees in your ROI calculation will give you a clearer view of the true investment required and help avoid surprises later.

Short-term over long-term

Focusing only on short-term cost savings can limit the true value of SaaS. While immediate efficiencies are important, SaaS ROI is often realised through long-term gains in scalability, continuous updates, and reduced risk.

When calculating ROI, consider how SaaS will support your organisation’s goals not just in the first year, but in the years ahead as your needs evolve.

It’s generally recommended to calculate for at least 5-10-year periods when considering SaaS implementations, given that it can take a year or more just to make the switch.

Choosing the wrong SaaS provider

Not all SaaS offerings are created equal. When evaluating a provider, it is important to look beyond core features and consider long-term fit.

Assess whether the platform is built to scale, how often it is updated, and what responsibilities remain with your teams versus the provider. Choosing a SaaS provider with deep expertise in your sector can reduce risk as well, and help your organisation realise ROI faster.

That’s where TechnologyOne comes in...