This is the second in a three-part series reflecting on the key themes that surfaced during Elite’s Vantage Sydney event. In my previous post, I covered the impact of AML regulations on Australian law firms and how firms can prepare for compliance without disrupting their operations.
This time, I’m shifting focus to something that comes up in every legal tech investment discussion – cost. Specifically, how firms should evaluate the total cost of ownership (TCO) of SaaS solutions.
During Vantage Sydney, industry advisors had the opportunity to sit down with Elite’s Chief Executive Officer, Mark Dorman, and Chief Product Officer, Elizabet Hardy, to discuss the evolving legal tech landscape. One of the most important takeaways? Firms still tend to focus on the upfront costs of SaaS solutions while underestimating long-term savings, efficiency gains, and the broader capabilities that true SaaS platforms offer.
Cloud-Hosted vs Cloud-Native – Not the Same Thing
Firms have technically been able to move to the cloud for years by renting online server space and virtualising their existing software. While this approach removes the hassle of maintaining on-premises servers, it fails to unlock the real benefits of a true cloud-native SaaS solution.
That said, it’s worth acknowledging that cloud-hosted solutions still offer some advantages. For instance, they allow firms to maintain customisations and develop new ones, as they technically still operate in an on-premises-like environment. Additionally, firms retain greater control over their environment and traditional access to their data. If these aspects keep you a little more comfortable, that’s completely fine. However, it’s important not to be deterred by cloud-native solutions that may seem less flexible at first glance.
Cloud-native applications, built from the ground up on platforms like Microsoft Azure or AWS, are designed to leverage cloud capabilities fully. While the notion of automatic updates might sound restrictive, let’s not forget we’ve been accepting regular updates from Microsoft via Office 365 subscriptions for years without any major disruptions. The key is understanding that the benefits of cloud-native SaaS—such as seamless integrations, enhanced security, and advanced platform services—far outweigh the perceived limitations.
Five Key Advantages of a True Cloud-Native SaaS Solution
Automatic Upgrades – New features, security patches, and improvements are delivered instantly, eliminating costly, time-consuming upgrades.
Scalability on Demand – Resources scale up or down instantly, without requiring additional hardware or infrastructure.
Built-in Security and Compliance – Leading cloud platforms handle security, backups, disaster recovery, and regulatory compliance automatically.
Platform Services and AI Capabilities – Cloud-native SaaS solutions enable firms to leverage machine learning, data analytics, and automation to transform workflows and gain actionable insights.
Reduced IT Overhead – With no need for on-premises servers, firms can significantly cut IT management costs and free up internal teams for more strategic initiatives.
The True Cost of SaaS – It’s More Than Just the Price Tag
Many firms recognise that the cost of SaaS solutions goes beyond just the subscription fee. However, most tend to stop their analysis at the price of a few servers and some SQL server licences, overlooking the deeper financial picture. Focusing solely on the annual fees can lead to misguided decisions.
The true total cost of ownership (TCO) considers a range of overlooked costs, such as hardware upgrades, IT headcount, compliance, and security management—expenses that can quietly accumulate with on-premises or cloud-hosted systems. SaaS solutions, on the other hand, can significantly reduce or eliminate these costs, providing a clearer path to long-term savings.
The Overlooked Costs of On-Premises and Hosted Solutions
Hardware and Infrastructure Costs – Regular upgrades for servers, storage, and networking equipment, along with maintenance contracts and warranties, add to ongoing costs.
Licensing Costs – Costs for server operating systems, database licences, middleware, antivirus, and virtualisation software can accumulate rapidly.
IT Headcount – Maintaining an on-premises setup demands dedicated IT staff to manage updates, security, backups, and disaster recovery. Salaries, training, and turnover further escalate costs.
Office Space and Power Costs – Physical servers require dedicated, climate-controlled space, increasing both real estate and energy costs.
Upgrade and Project Management Costs – Major system upgrades often involve external consultants, extended downtime, testing, and retraining, along with project management expenses.
With true SaaS, these costs are either drastically reduced or eliminated entirely, offering a more predictable and streamlined budgeting approach that allows firms to focus on strategic growth rather than ongoing maintenance.
Effortless Upgrades and Scalable Efficiency
One of the biggest advantages of true SaaS is that upgrades happen automatically. Firms no longer need to wait years or justify upgrade budgets just to access the latest features. Instead, new capabilities are delivered seamlessly—no disruption, no downtime, and no extra cost.
SaaS also introduces efficiencies that aren’t possible with on-premises systems. As Elite CEO Mark Dorman highlighted during the industry advisor session:
“A true SaaS system’s efficiencies allow you to grow your business without needing to grow your back-office headcount.”
This point is particularly relevant for firms looking to scale efficiently. With a flexible, scalable SaaS solution, built-in automations, workflows, and intelligent resource scaling handle routine tasks without increasing headcount.
The Cost Comparison – Cloud-Hosted vs Cloud-Native
To clarify, the following cost comparison is purely for illustration purposes and is not intended to be an all-encompassing analysis of every possible cost. There will undoubtedly be other expenses to consider, so please keep that in mind before heading to the comments section. 👌🏼
The figures used are based on example scenarios where licence costs for each option are assumed to be the same, with full-time equivalent (FTE) resource costs reflecting average annual salaries in Australia. In both cases, 10 new licences are added in year 5, with annual subscription fees increasing by 5% and FTE salaries by 2.5%. Actual costs will vary depending on firm size, vendor pricing, and internal resource requirements.
This comparison is intended to highlight the potential cost differences between Cloud-Hosted and Cloud-Native SaaS solutions, not to serve as a definitive financial analysis.
Cloud-Hosted Solution
Scenario: I have assumed the need for 1 FTE IT Admin person throughout the 10 year period and the need for 3 additional FTE back-office admin staff to support the new licensed users from year 5. IT Maintenance in this scenario relates to items like security and backups.
Scroll sideways to see the rest of the table
Cost Element | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | Year 6 | Year 7 | Year 8 | Year 9 | Year 10 |
Cloud-Hosted Subscription | $100,000 | $105,000 | $110,250 | $115,763 | $121,551 | $127,628 | $134,010 | $140,710 | $147,746 | $155,133 |
Cloud-Hosted Additional Licences | $0 | $0 | $0 | $0 | $12,155 | $12,763 | $13,401 | $14,071 | $14,775 | $15,513 |
Cloud-Hosted IT Admin | $120,000 | $123,000 | $126,075 | $129,227 | $132,458 | $135,769 | $139,163 | $142,642 | $146,208 | $149,864 |
Cloud-Hosted Admin Staff | $0 | $0 | $0 | $0 | $240,000 | $246,000 | $252,150 | $258,454 | $264,915 | $271,538 |
Cloud-Hosted Upgrades | $0 | $0 | $100,000 | $0 | $0 | $100,000 | $0 | $0 | $100,000 | $0 |
Cloud-Hosted IT Maintenance | $50,000 | $52,500 | $55,125 | $57,881 | $60,775 | $63,814 | $67,005 | $70,355 | $73,873 | $77,566 |
Total Cloud-Hosted Cost | $270,000 | $280,500 | $391,450 | $302,871 | $566,939 | $685,974 | $605,729 | $626,232 | $747,516 | $669,614 |
10 Year Total | $5,146,824 |
Cloud-Native Solutions
Scenario: I have assumed that the cloud-native SaaS solution is taking care of security, backups, upgrades and systems monitoring, and that additional back-office FTEs are not required due to scalable workflows and processes.
Scroll sideways to see the rest of the table
Cost Element | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | Year 6 | Year 7 | Year 8 | Year 9 | Year 10 |
|---|---|---|---|---|---|---|---|---|---|---|
Cloud-Native Subscription | $100,000 | $105,000 | $110,250 | $115,763 | $121,551 | $127,628 | $134,010 | $140,710 | $147,746 | $155,133 |
Cloud-Native Additional Licences | $0 | $0 | $0 | $0 | $12,155 | $12,763 | $13,401 | $14,071 | $14,775 | $15,513 |
Cloud-Native IT Admin | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 |
Cloud-Native Admin Staff | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 |
Cloud-Native Upgrades | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 |
Cloud-Native IT Maintenance | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 |
Total Cloud-Native Cost | $100,000 | $105,000 | $110,250 | $115,763 | $133,706 | $140,391 | $147,411 | $154,781 | $162,520 | $170,646 |
10 Year Total | $1,340,467 |
📊 10-Year Cost Comparison
Cloud-Hosted Total Cost: $5,146,824
Cloud-Native SaaS Total Cost: $1,340,466
Total Savings with SaaS: $3,806,357
What’s Driving the Cost Difference?
The main savings in Cloud-Native SaaS come from eliminating:
$1.53M in additional admin headcount costs
$1.34M in IT staff and infrastructure costs
$300K in major upgrade costs over 10 years
These numbers illustrate the substantial cost difference between maintaining a traditional cloud-hosted system and adopting a modern SaaS platform. The savings stem not just from lower infrastructure and platform licensing costs, but also from reduced IT headcount, automatic upgrades, and scalability without upfront investments. By eliminating hidden costs such as hardware maintenance, manual updates, and energy consumption, SaaS provides a more predictable and efficient financial model, allowing firms to allocate resources more strategically while reducing the total cost of ownership over the long term.system and moving to a modern SaaS platform.
Conclusion: The Real TCO Question – What’s the Cost of NOT Moving to a Cloud-Native SaaS Solution?
When evaluating legal technology investments, it’s crucial for firms to look beyond the initial price tag and consider the comprehensive total cost of ownership. While true cloud-native SaaS solutions may come with higher upfront costs, they unlock significant long-term savings by eliminating expenses related to hardware maintenance, manual updates, and energy consumption. More importantly, they enable firms to leverage advanced platform capabilities such as machine learning, enhanced security, and integrated services that can transform workflows and unlock efficiencies not possible with legacy systems.
To make informed decisions, firms should ask the right questions:
What efficiencies does this solution bring that weren’t available before?
It’s not just about automating tasks but transforming workflows to save time and reduce manual intervention.
How can I leverage platform technology to extend efficiencies and workflows?
Integrations with AI, data analytics, and other cloud services can unlock capabilities that aren’t possible with legacy systems.
What is the cost of NOT doing this?
Sticking with outdated systems means higher maintenance costs, security risks, and a growing gap between firm capabilities and market demands. It can also limit a firm’s ability to scale and adapt to evolving client expectations.
How predictable and manageable are the costs over time?
SaaS solutions typically offer more predictable pricing models, reducing the risk of unexpected expenses that often come with on-premises or cloud-hosted systems.
How quickly can the firm respond to changing client demands and market conditions?
Cloud-native platforms, with their scalability and automatic updates, allow firms to adapt faster and remain competitive.
Does the solution enhance security and compliance without increasing complexity?
Built-in security and compliance features of cloud-native SaaS reduce the burden on internal IT teams, ensuring that security is a strength, not a liability.
The real question isn’t just about how much SaaS costs today - it’s about how much it saves in the long run. Sticking with outdated systems means higher maintenance costs, security risks, and a growing gap between firm capabilities and market demands. It can also limit a firm’s ability to scale and adapt to evolving client expectations.
For firms still on the fence, the takeaway is simple: look beyond the price tag. The true total cost of ownership isn’t just about what you spend - it’s about what you gain in efficiency, security, scalability, and strategic growth.
Quick Poll
When evaluating a SaaS legal tech solution, what do you think is the most overlooked factor in the total cost of ownership (TCO)?
1️⃣ Efficiency gains – Automation & scalability
2️⃣ Upgrade costs
3️⃣ Operational expenses – Training, integrations, etc.
Next in This Series…
In my next post, I’ll explore the shift to managed services - how firms are rethinking ongoing legal tech support, reducing their reliance on internal IT teams, and maximising the value of their software investments.
Stay tuned!
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