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Google Ads Total cost of ownership
TCO = subscription + implementation + migration + integration + training + administration + operations + security + contract and exit
Each category is shown separately. Each cost is counted once.
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SaaS TCO
Free SaaS TCO Calculator
See what a SaaS product really costs over one, three or five years. Add subscription, setup, migration, training, staff time and exit costs. Get the total, yearly costs and cost per user, with every formula shown.
- Compare vendors side by side
- Runs in your browser
- Nothing is saved or sent
Projection
Year by year cost projection
One time costs appear in the year they are paid. Annual subscriptions appear in the year they are paid, not spread across months.
Compare
Compare vendors and plans
Enter up to two other options. They use your period, labour rate and growth settings, so the comparison is fair. Leave seats and users blank to use the main figures. Enter only prices you have checked with each vendor.
| Input | Option B | Option C |
|---|
TCO comparison
A lower TCO does not make a product better. Weigh features, security, support, reliability, compliance and fit too.
Scenarios
What if costs change?
Change a few assumptions and see the effect. Leave a cell blank to use your main inputs. Scenario names are labels, not predictions.
| Assumption |
|---|
Results by scenario
| Result |
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Before and after
Current setup vs proposed SaaS
Enter what you spend today and what will remain after the switch. The proposed total adds the SaaS TCO from above. Nothing disappears unless you say so.
| Cost per year | Today | After the switch |
|---|---|---|
| Existing software subscriptions | $ | $ |
| Current infrastructure | $ | $ |
| Existing support contracts | $ | $ |
| Internal administration | $ | $ |
| Legacy maintenance | $ | $ |
| Current integration costs | $ | $ |
| Data storage and security | $ | $ |
Leave "after" blank if a cost stays the same. Enter 0 if it stops completely.
Methodology
How the calculator works
A month by month cash model drives every result. Start costs are paid before month 1. Monthly costs are paid at the start of each month. Annual items are paid at the start of each year. Exit costs are paid at the end. Only displayed numbers are rounded.
Subscription
Monthly = plan price per month, or annual price paid in months 1, 13, 25. Per seat = price × seats
A total plan price is never multiplied by seats.
Usage
Billable units = usage minus included units, never below zero. Charge = billable units × rate
With a second rate, only units above the band limit use it.
Price increases
Price in year n = base price × (1 + increase) to the power of the number of renewals passed
Applied from the increase month, then every 12 months. Never applied to one time fees.
Labour
Cost = hours × loaded hourly cost. Training = participants × hours × rate
A salary allocation replaces admin hours, so the same person is never counted twice.
Growth
Users in year n = start × (1 + growth) to the power n minus 1
Rounded to whole users and seats each year.
Average monthly TCO
Average = TCO ÷ months
Includes one time costs. It is not your monthly bill.
Cost per user
Per user per month = TCO ÷ (average active users × months)
Shown with and without one time costs. Hidden when users are zero.
Cost per seat
Per seat per month = TCO ÷ (average paid seats × months)
Not the same as the price per seat.
Minimum commitment
True up = commitment minus subscription spend in a contract year, if positive
Added at the end of each full contract year.
Present value
PV = start costs + sum of month m costs ÷ (1 + monthly rate) to the power m minus 1
Monthly rate = (1 + annual rate) to the power of 1/12, minus 1.
Before and after
Difference = current TCO minus (remaining costs + SaaS TCO). % = difference ÷ current TCO
Positive means the proposed setup costs less.
What is SaaS total cost of ownership?
SaaS total cost of ownership, or TCO, is everything you pay to buy, set up, run and eventually leave a SaaS product over a set period. TechTarget describes TCO as the expenses of purchasing, deploying, managing, using and retiring an IT asset. For SaaS, that covers far more than the monthly subscription.
The five stages of SaaS cost
Buy
Contract negotiation, procurement and any minimum commitment.
Set up
Implementation, configuration, data migration and integrations.
Learn
Training, change management and updated processes.
Run
Subscription, usage, support, administration and maintenance.
Leave
Data export, termination fees and moving to a new tool.
Grow
More users, more usage, upgrades and price increases.
Who can benefit from a SaaS TCO calculator?
Anyone who has to budget for, buy or approve software.
Small and medium businesses
See the real cost before committing to a tool that looks cheap per month.
Procurement teams
Compare vendor quotes on the same basis, including commitments and exit costs.
IT managers
Plan for integration, admin time and security tools that are easy to miss in a vendor quote.
Finance teams
Forecast software spend year by year, including price increases and growth.
Business owners
Decide between vendors, or between a new tool and the current setup.
Startup founders
Choose tools that will still be affordable as the team grows.
Operations teams
Cost workflow software fully, including the time to run it.
Teams consolidating tools
Show what you save by replacing several subscriptions with one.
Teams planning a migration
Budget for data migration, overlap and switching costs.
Anyone comparing plans
See when a higher tier or annual billing actually costs less.
How to calculate SaaS TCO
TCO = subscription + implementation + migration + integration + training + administration + operations + security + contract and exit costs
Step by step
- Pick a period. Often the contract length, or three years.
- Price the subscription. Use the real pricing structure, billing timing and expected increases.
- Add one time costs. Setup, migration, integrations and initial training.
- Add recurring costs. Admin time, support, usage, maintenance and tools.
- Add growth. More users, seats and usage over time.
- Add contract and exit costs if you may switch later.
- Work out the averages. Per year, per month and per user.
Worked example
An illustration with made up figures. 25 seats over 36 months, with a loaded labour cost of $40 an hour.
| Cost | Calculation | Amount |
|---|---|---|
| Subscription | $30 per seat × 25 seats × 36 months | $27,000 |
| Implementation | Vendor setup and configuration | $4,000 |
| Data migration | Cleaning and import | $2,500 |
| Training | 25 people × 4 hours × $40 | $4,000 |
| Administration | 6 hours a month × $40 × 36 | $8,640 |
| Integration | $50 a month × 36 | $1,800 |
| Total cost of ownership | $47,940 | |
| Average per month | $47,940 ÷ 36 | $1,331.67 |
| Per seat per month | $47,940 ÷ (25 × 36) | $53.27 |
The advertised price was $30 per seat per month. The real cost is $53.27 per seat per month, about 78% more.
SaaS subscription cost vs total cost of ownership
The subscription is the price on the vendor’s website. TCO is what the business actually spends. In the example above, the subscription was only 56% of the total.
| Subscription cost | Total cost of ownership | |
|---|---|---|
| What it includes | The vendor’s recurring fee | Every cost of buying, running and leaving the product |
| Who pays it | Paid to the vendor | Paid to the vendor, other suppliers and your own staff |
| Where you see it | Pricing page or quote | Spread across budgets, teams and time |
| Best used for | A first filter | Budgets, approvals and vendor comparisons |
One time costs vs recurring costs
One time costs are paid once, usually at the start. Recurring costs are paid every month or year for as long as you use the product.
| One time costs | Recurring costs | |
|---|---|---|
| Examples | Setup, migration, integration build, initial training | Subscription, usage, support, admin time, maintenance |
| When you pay | Mostly at the start, plus exit costs at the end | Every month or year |
| Effect of a longer period | Spread over more months, so the monthly average falls | Keeps adding up |
| Effect of growth | Usually none | Rises with users, seats, usage and price increases |
SaaS TCO vs on premise software TCO
On premise software runs on your own servers. The cost profile is very different.
| SaaS | On premise | |
|---|---|---|
| Upfront cost | Low. Setup and migration | High. Licences, servers and installation |
| Ongoing cost | Subscription and usage | Maintenance contracts, hosting, power and IT staff |
| Updates | Included | Often paid upgrade projects |
| Scaling | Add seats or usage as needed | May need new hardware or licences |
| Cost over time | Rises steadily with each year subscribed | High at first, then lower until the next upgrade |
| Exit | Data export and switching costs | Hardware disposal and data migration |
How to compare SaaS vendors by TCO
A fair comparison uses the same assumptions for every option.
- Same period. Compare three years with three years.
- Same users and growth. Use one forecast for all vendors.
- Same cost categories. If one vendor needs an integration, include its cost.
- Same labour rate. Price staff time the same way everywhere.
- Real contract terms. Billing timing, commitments and price increases from each quote.
- Exit costs. Include them if you might switch.
How user growth affects SaaS costs
Per seat, per user and usage based pricing all rise as you grow. Price increases at renewal add to the effect.
An illustration with made up figures. A $25 per seat plan, 20 seats growing 25% a year, with a 5% yearly price increase.
| Year | Seats | Price per seat | Yearly cost |
|---|---|---|---|
| Year 1 | 20 | $25.00 | $6,000 |
| Year 2 | 25 | $26.25 | $7,875 |
| Year 3 | 31 | $27.56 | $10,253 |
| Total | $24,128 |
Without growth and price increases, three years would cost $18,000. With them, it costs $24,128, about 34% more. Plan upgrades and extra usage can add more.
Annual billing, commitments and cash timing
Annual billing changes when you pay, not only how much.
- Cash paid in the period. What leaves your bank account. A full year is paid upfront.
- Cost for the period. Only the months you actually use within the period.
- Commitment after the period. Payments you still owe under the contract.
Say the annual fee is $12,000 and you look at 18 months. You make two payments, so cash paid is $24,000. But only 18 months fall in the period, so the cost for the period is $18,000. The other $6,000 is prepaid for months after it. This calculator shows cash paid and tells you how much is prepaid.
Common SaaS TCO calculation mistakes
- Comparing only advertised prices. The subscription is often only part of the cost.
- Ignoring implementation and migration. These can be large in year one.
- Forgetting internal staff time. Admin and support hours are real costs.
- Counting the same cost twice. For example the same consultant in setup and migration.
- Mixing monthly and annual figures. Convert everything to the same period.
- Ignoring contract commitments. Minimum spend and fixed terms still apply if usage falls.
- Assuming every user needs a paid seat. Check how the vendor counts users.
- Forgetting usage and overage charges. They grow as you grow.
- Ignoring price increases. Renewal prices are often higher.
- Confusing cash with average cost. An annual payment is not a monthly cost.
Limits of a SaaS TCO calculator
The results are only as accurate as the costs and assumptions you enter.
- It cannot know fees a vendor has not disclosed.
- It cannot predict future price changes.
- It cannot guarantee how many users, seats or units you will need.
- It cannot know how much staff time the software will really take.
- It does not model taxes, financing or accounting treatment.
Frequently asked questions
What is a SaaS TCO calculator?
A tool that adds up every cost of using a SaaS product over a set period. That includes the subscription, setup, migration, training, staff time, support and exit costs.
What does total cost of ownership mean?
The full cost of buying, setting up, running and eventually leaving a product, not just its purchase price.
How do I calculate SaaS TCO?
Add the subscription over the period, all one time costs and all recurring costs. Include growth, price increases and exit costs where they apply.
What costs should be included in SaaS TCO?
Subscription, usage, add ons, implementation, migration, integration, training, administration, maintenance, and where relevant security, compliance, contract and exit costs.
Does SaaS TCO include implementation and training?
Yes. They are often among the largest costs in the first year.
How do I calculate the cost per SaaS user?
Divide total TCO by the average number of active users and by the number of months. That gives cost per user per month.
What is the difference between subscription cost and TCO?
Subscription cost is the vendor’s fee. TCO adds every other cost of using the product, including your own staff time.
How can I compare two SaaS vendors by total cost?
Use the same period, users, growth, labour rate and cost categories for both. Then compare total TCO, cost per user and the yearly projection.
How do annual billing and subscription price increases affect TCO?
Annual billing moves payments forward, so cash leaves earlier. Price increases raise the cost of every renewal after they apply.
Should internal employee time be included in TCO?
Yes. Staff time for setup, training and administration is a real cost, even though it is not paid to the vendor.
How long should the TCO evaluation period be?
Match it to the contract or how long you expect to use the product. There is no single correct length, but use the same period for every option.
Does a lower TCO mean a SaaS product is better?
No. It means it costs less under your assumptions. Features, security, support and fit matter too.
Can a SaaS TCO calculator predict future costs accurately?
No. It projects costs from your assumptions. Real costs change with usage, prices and how the product is adopted.
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