Quocirca analyst, Bob Tarzey said that on average software run in-house provided a lower total cost of ownership than hosted alternatives over five years.

"When all costs were taken in to consideration, such as server hardware and software, staff, maintenance and the actual cost for software licences, over a period of five years. the cost of ownership of an on-demand subscription is rarely less than the cost of deploying software on-premises," he said.

"The motivation to go for on-demand comes from other areas such as convenience, security, business continuity, speed of implementation and other similar considerations."

Forrester research, assessing the total economic impact over 10 years of software as a service compared to those applications managed in-house also suggests there is little difference in running costs when deployed in companies using more that 250 seats. And larger companies using over 500 seats generally saved money by running the software in-house.

Not surprisingly, hosted software vendors argued that these findings do not take into consideration the up-front costs of implementing business applications with a company’s infrastructure, as well as the productivity gains enabled by devolving responsibility for upgrades, maintenance and management to an off-site third party.

Other arguments to take into consideration cited were improved security and business continuity, easier customisation, the ability to better share data and integrate with partners or customers, and the opportunity to focus on their core business, as well as the flexible financing options offered by hosted providers.