Why does the cheaper option change when I extend the period?

Because one-off costs are paid once but recurring costs and internal effort accumulate every year. An option with high upfront cost but low ongoing cost becomes relatively more attractive the longer you run it — which is exactly why the comparison period should reflect how long you genuinely expect to use the system, not whichever number favours the answer you wanted.

What counts as "internal effort"?

The time your own team spends administering, maintaining or supporting the software — not implementation, which is a one-off cost. It's valued at the day rate you set, and it's usually the most under-counted cost in a build-vs-buy comparison because no invoice ever arrives for it.

The two totals are close — which should I pick?

The tool flags anything within roughly 10% as a practical tie on cost. At that point, decide on capability, reliability and how hard each option is to leave, rather than treating a small cost difference as decisive.

Software TCO Calculator

Compare the full multi-year cost of two software options side by side.

Runs entirely in your browser — nothing you enter is uploaded.

Comparison basis

Period

years

How long you'll run it

Renewal growth

Annual, from year two

Internal day rate

Fully loaded

Exit cost

Applied to both, once

Option A — SaaS

Option name

One-off costs

Licence, implementation, migration, initial training

Annual recurring

Subscription, support, hosting

Internal effort

days/year

Administration and maintenance — usually the largest omitted cost

Option B — Perpetual licence

Option name

One-off costs

Licence, implementation, migration, initial training

Annual recurring

Subscription, support, hosting

Internal effort

days/year

Administration and maintenance — usually the largest omitted cost

Total cost over 5 years

Option A — SaaS

£405,538

One-off£40,000

Recurring£331,538

Internal staff time£24,000

Exit£10,000

Option B — Perpetual licence

£489,192

One-off£270,000

Recurring£149,192

Internal staff time£60,000

Exit£10,000

Option A — SaaS is cheaper by £83,654 (21%) over 5 years. Change the period and check whether the answer holds — the comparison window drives this conclusion more than any single cost line.

Cost only. This says nothing about capability, reliability, security or fit — and a cheaper option that cannot do the job has no meaningful TCO.

How to use Software TCO Calculator

Set the comparison period, expected annual renewal growth, internal day rate and exit cost at the top — these apply to both options equally.
Fill in each option's name, one-off costs, annual recurring cost and internal effort in days per year.
Read the five-year totals and the verdict panel below, which states whether the gap is large enough to matter or close enough to call a tie.
Change the comparison period to see whether the cheaper option stays cheaper over a longer or shorter run.

How this works

Total cost of ownership sums every cost over an ownership period, not just the invoice. One-off costs — implementation, migration, integration build, initial training — land in year one. Recurring costs — licensing, support, hosting, ongoing internal administration — repeat annually, with a growth rate applied because renewal prices rarely hold flat. Internal staff time is costed at a loaded rate, since it is real money even though no invoice arrives. Exit cost is included in the final year, because leaving a system is itself a project.

TCO = one-off costs + Σ (annual recurring × (1 + growth)^year) + internal staff cost + exit cost

Assumptions

Internal effort is valued at a fully loaded rate including employer taxes, benefits and overhead.
Recurring costs grow at the rate you set, compounding annually from year two.
Nominal figures — no discount rate is applied, so later years are not present-valued.
Both options are assumed to deliver equivalent capability. If they do not, cost comparison alone is misleading.
Exit cost is charged once, in the final year of the comparison period.

Worked example

A £60,000/year SaaS platform against a £180,000 one-off perpetual licence, over five years.

Option A: £60,000/yr + £40,000 implementation
Option B: £180,000 licence + £90,000 implementation + £27,000/yr support
Renewal growth: 5% annually
Result: A: about £395,538 · B: about £479,192

The perpetual licence stops paying a subscription after year one, so on licence cost alone it looks cheaper from year three. But the larger implementation, the 15% annual support and roughly two and a half times the internal administration keep it £83,654 more expensive over five years. Extend to seven and the two converge to within 2%; extend to ten and Option B becomes the cheaper of the two. The comparison period decides the answer, which is exactly why it must be set honestly before the numbers are run rather than chosen afterwards.

How to read the result

The comparison period drives the conclusion more than any single cost line, so choose it honestly: use how long you actually expect to run the system, not the term that favours a preferred option. Pay particular attention to internal staff time, which is usually the largest omitted cost and the reason 'cheaper' options often are not. If two totals land within roughly 10% of each other, treat the decision as a tie on cost and decide on capability, risk and exit difficulty instead.

Limitations

Cost only. It does not measure capability, reliability, security posture or fit.
No discounting is applied, so it understates the advantage of deferring spend.
Excludes opportunity cost and the business impact of a failed or delayed implementation.
Assumes both options are genuinely viable; a cheaper option that cannot do the job has no meaningful TCO.

Frequently asked questions

Why does the cheaper option change when I extend the period?: Because one-off costs are paid once but recurring costs and internal effort accumulate every year. An option with high upfront cost but low ongoing cost becomes relatively more attractive the longer you run it — which is exactly why the comparison period should reflect how long you genuinely expect to use the system, not whichever number favours the answer you wanted.
What counts as "internal effort"?: The time your own team spends administering, maintaining or supporting the software — not implementation, which is a one-off cost. It's valued at the day rate you set, and it's usually the most under-counted cost in a build-vs-buy comparison because no invoice ever arrives for it.
The two totals are close — which should I pick?: The tool flags anything within roughly 10% as a practical tie on cost. At that point, decide on capability, reliability and how hard each option is to leave, rather than treating a small cost difference as decisive.