Cloud Subscription vs. Perpetual License OEE: What is right for your organization?
Short product life cycles. Tight margins. Shifting consumer demand. And constant pressure to squeeze more out of your manufacturing operation. Does it ring familiar?
Most organizations that adopt an Overall Equipment Efficiency (OEE) solution do so to better manage all of the above. This gold standard for measuring manufacturing productivity is integral to identifying underlying issues that prevent you from achieving optimal production results. When real-time data drives decisions, you can systematically take action to finetune the entire manufacturing process.
Once you move to this proactive rather than reactive approach to improving OEE, another question arises: What OEE system is the best fit for your organization? There are two fundamentally different models to consider: Cloud-Based, Software-as-a-Service (SaaS) OEE vs. Perpetual License (on-prem) OEE.
What sets them apart? What are the factors to consider as you evaluate each? Let’s take a look.
Financial Cost: SaaS vs. Perpetual License OEE
The primary difference between SaaS and perpetual license software is cost, especially the upfront financial investment. Consider the following:
Payment model
- Perpetual license software: A large, one-time expenditure, typically followed by any annual support costs, are defining characteristics of perpetual license software. Once you pay, you own the software and can utilize it indefinitely. Additional upfront costs may include hardware (e.g. on-prem servers), labor for implementation, any custom development, and ongoing maintenance.
- SaaS, or cloud-based OEE: As the name indicates, you pay for a service on a lower, recurring subscription basis, typically monthly or annually. You must keep paying for access to the service, which includes not only the vendor-hosted online software, but also the infrastructure needed to support it, such as maintenance, support, backups, and upgrades.
Budgeting
While the pros and cons of the payment models often garner much attention, there’s another less talked about aspect to consider as well. A larger, one-time cost typically counts as a capital expenditure. It’s, in other words, an asset on your Balance Sheet. A recurring lower subscription, in contrast, tends to fall under Operating Expenditures on the Income Statement.
This dynamic not only affects your taxes for the year, but also determines the procurement process you must undergo for purchasing approval. Since perpetual license software comes from your Capital Expenditures (CapEx) budget, the procurement process is longer and involves more decision-makers for approval. That’s not the case for a SaaS subscription, which falls under the Operating Expense (OpEx) budget, potentially eliminating the need to pull corporate management in for a lengthy evaluation of the purchasing decision.
For your consideration
Budget constrained—or not? Your financial reality may ultimately help sway your decision in favor of one or the other. If cost is the primary barrier between you and OEE, SaaS OEE could work in your favor.
OEE System Implementation Timeframe
As the saying goes, time is money. How much do you have of each and how do you want to spend it? That consideration inevitably comes into play as you eye the difference between perpetual OEE and SaaS when it comes to the ease and speed of implementation.
A few factors, in particular, will help guide you toward the right solution:
- What is the size and scope of your production lines or facilities?
- Do you have a single site or several sites?
- How important is speed of adoption to the success of the new rollout?
To break it down: If your company has only five production facilities, then taking six months to get each facility on board likely won’t make or break the OEE enterprise implementation. However, if you have 25 manufacturing facilities and each takes six months, then it will take over 12 years to bring the job to completion.
Timing
So, if speed is of the essence, which solution comes out on top? There’s no question SaaS OEE is less complex to implement. The no-code, preconfigured nature of the software means no custom scripting is required, which, in turn, cuts back on installation time and development labor. As a result, there is greater potential with SaaS OEE for an expedited implementation or rollout.
But if you require more customization, you may find the functionality of the software is not robust enough to meet your demands. Depending on the size and complexity of your organization, this may be a big deal.
Perpetual license software comes at a considerably higher installation cost and requires more in-house resources. From hardware to data center resources to IT infrastructure needs to resilience measure, the rollout tends to be complex and time-consuming. But it does generally bring opportunities for customization if that is what your organization needs.
Scaling
Even when an on-premise OEE solution may seem like an option down the road, cloud-based OEE is usually an ideal way to start. The reason is the ability to scale. Rather than making a big investment in perpetual license software that may turn out to be less than a great fit as your organization evolves, cloud-based OEE lets you treat the implementation like a puzzle.
As the manufacturing capacity grows, you can upgrade to a higher-tier plan, whether it means more computing power, memory, storage, or something else. Scaling such a solution also does not bring operations to a complete halt; you can, consequently, expand without prolonged downtime.
And, should you for some reason change your mind, you can simply choose not to renew your subscription and look back at a minimal investment in comparison to the cost perpetual OEE would have incurred.
In sum, an OEE system should scale with your organization for years to come, both functionally and financially. Consider both short- and long-term pricing implications of licensing models. Pricing models that charge for each machine, user, or screen can get expensive very quickly. Think carefully about these potential barriers to growth from the very beginning to avoid surprises later.
Measuring OEE: Customization = Complexity
How much customization does your organization require? The answer to this question will potentially determine the route you take. A complex operation likely demands a robust, flexible OEE system that delivers more than drag-and-drop features. Customization, in turn, brings up both cost and installation time.
With customization comes increased risk. The large number of unknown variables can, for instance, make the project difficult to define and result in scope creep. Lack of time, rising cost, and knowledge constraints may also cause the implementation to suffer and, worse, lead to project failure.
The no-code, no-script SaaS solution, in comparison, includes one set of features and functionality. While limited client configuration is possible, this solution is designed for quick implementation, training, and ease of use. When the glove fits, so to speak, it produces the results you seek. It all depends on your need for custom scripting to incorporate the OEE system into your process.
Total Cost of Ownership
Another distinguishing feature between perpetual license and cloud-based OEE is the total cost of ownership (TCO), or the accumulation of both direct and indirect costs necessary to purchase, implement, and maintain software. The TCO generally starts high with perpetual software and decreases over time. On the other hand, subscription-based solutions start much lower and remain consistent with minimal increase over time.
In addition to the licensing costs discussed above, the total cost of ownership includes implementation labor, support renewals, hardware, training, consulting, upgrades, monitoring, backups, and more.
Let’s start with the demand for labor. A complex OEE system requires more labor and staffing resources. This dynamic directly impacts your implementation budget and indirectly impacts the long-term resources required to maintain such a system.
Consider questions such as:
- Would you require a third-party integrator for implementation?
- Do you have the in-house expertise and manpower to run a full-scale OEE effectively?
The latter question applies not only to the first implementation phase but to the entire life cycle of the product.
In the case of a cloud-based OEE solution, that life cycle only extends as long as you pay for the service. And, more significantly, since SaaS by design is fully managed, you hardly need to devote any in-house IT staff and resources to ongoing maintenance, back-ups, security, upgrades, health monitoring, and more. The service provider essentially needs to win you over every month or year, putting you in the driver’s seat.
Customer support for perpetual license software is commonly charged on top of the actual licensing cost. Depending on the vendor, a support contract may include anything from priority technical support to free software upgrades. On the other hand, customer support is generally included in the monthly or annual subscription fees of SaaS solutions.
How to Choose?
The many pros and cons detailed above indicate there is not one right answer, and your choice largely depends on the unique circumstances of your organization.
Consider:
- What is your budget?
- How is your organization structured?
- What’s the capacity of your in-house IT team?
- What are your must-have features?
- What do you aim to accomplish?
If you would like to discuss your questions directly with us, we’re here to help. In addition to contacting us, we have compiled a wealth of resources to allow you to narrow down your options and find the best fit.
To help document your OEE requirements, you can reference the OEE Feature Matrix on Sepasoft’s website, which compares the functionality of Cloud OEE to Sepasoft’s Standard OEE Downtime Module.
Another way to compare solutions is to request a demo:
Need assistance? Please get in touch.