Calculate your return on investment (ROI)

Should I use a SaaS solution – or have an on-premises ANPR system?

software-as-a-service cloud anpr

If you are looking for ANPR technology and vehicle identification, you will find several types of solutions on the market. In this guide we point out the key differences between using software-as-a-service solutions and on-premises technologies – with an extra ROI calculation example that you can apply to your own business.

When you’ve reached the end of this guide, you will have a grasp of the key takeaways and, hopefully, will possess a clear understanding of which approach best suits your project.

01. The difference between SaaS and on-premise

Nowadays, if you need a software-based function for your business (such as license plate recognition), basically you can select from two approaches:
Using an online/cloud service:

Using an online/cloud service:

In the case of online/cloud service you do not own the technology – it is like renting it: the software and data are in the cloud of the provider and you pay for exactly as much as you use it, usually based on the number of transactions. This type of solution is often referred to as “pay-per-use” or “SaaS” (software-as-a-service).

At Adaptive Recognition, our SaaS-model ANPR technology is ANPR Cloud.

Owning the software/system:

Owning the software/system:

Here, you buy the product and insert it into your workflow. The technology is physically with you, at your facility, which is why it is called “on premises.”

At Adaptive Recognition, our on-premises ANPR technology is called Carmen® ANPR.

02. How the cloud lets in the sunshine

advantages of cloud systems

Cloud technologies have clearly become the core of our digital transformation revolution. These platforms have delivered even more benefits than what we all had anticipated – and have taken effect on the very fabric of commerce, upending entire business sectors. Data is now readily accessible and can be viewed and analyzed automatically, using new, intelligent ways.

Businesses moving to the cloud do it for a number of reasons, gaining a wide variety of benefits. These fall into four categories: cost efficiency, agility, service quality, and new opportunities. Read on for some short overviews of these aspects.

Cost-efficiency

Cost-efficiency

Cloud computing offers significant potential cost savings over on-premises infrastructure, especially considering the full cost of the latter. Also, cloud computing enables organizations to move IT outlays from capital expenditure (CapEx) to operational expenditure (OpEx). Since the fixed costs associated with shared infrastructure are avoided, the cloud also provides much greater transparency into the true costs of individual applications.

Agility

Agility

Unlike traditional on-premises infrastructure that takes weeks or even months to deploy, cloud projects move much more quickly, without the need to allocate resources up front, or spend a considerable amount of time on infrastructure planning. To take full advantage of this increased flexibility, organizations are adapting to new work procedures, like using agile software development methodologies, continuous integration and deployment (CI/CD), and modern PaaS-based application architectures.

Service quality

Service quality

Ever greater workloads are continuously raising the bar in terms of the quality of service cloud services must provide. As a result of such inherent ambition to meet those challenges, migration to the cloud often offers users significant improvements in performance, reliability, and security over that of on-premises infrastructure. Moreover, any improvements to the cloud service are available as they happen and without the need to update the subscriber’s system.

New opportunities

New opportunities

The cloud service also enables the integration of novel application scenarios, which would simply not be possible, or would be prohibitively expensive to deliver using on-premises infrastructure – additional features such as big data storage and analytics, machine learning, and compliance with industry certifications such as ISO, PCI, HIPA and GDPR, in which compliance is entailed in the cloud providers’ service. These technologies drive innovation and competitive advantages that are available only from the cloud.

03. Let the numbers do the talking

IT spending on cloud

The worldwide trend of convergence toward cloud services is apparent according to all available statistics – and you can feel that, both in your personal life and corporate environments, when you use Google Drive, Spotify, online invoicing or Office 365. Cloud technology is everywhere, all around us.

The following diagram forecasts the growth of cloud/on-premises services in the 2020-2022 period:

(Source: Cloud Operations and Management | Microsoft Practice Development Playbook)

cloud anpr registration

Amazon Web Services, the giant hosting platform for hundreds of cloud applications, has recently shared its remarkable aggregated statistics on the performance-gain their clients experience.

Amazon Web Services also hosts our ANPR Cloud solution. Get more info or register here: link (It only takes a minute and the first 200 transactions every month are free).

According to their numbers, just to mention a few:

  • Time saved to deploy new equipment: 97%
  • Time saved to respond to unexpected network changes: 98%
  • Time improvement to deploy new applications: 37%
  • Number of applications deployed per year increase: 118%
  • Application development staffing reduction: 22%
  • Unplanned downtime reduction: 80%

AWS Cloud Migration: Total Cost of Ownership & ROI Benefits link.

The list continues, and all these improvements resulted in a 64.3% lower total cost of ownership (TCO) and a 560% 5-year ROI value. But how are these values calculated? Read on to delve into the numbers.

04. Understanding TCO

cloud anpr total cost of ownership

TCO is a financial estimate that helps you determine both the direct and indirect costs of a product or system, such as your new ANPR solution. This concept helps you understand the long-term picture of exactly how much the system will cost for your organisation. It goes beyond the initial purchase price – instead, it deals with the full cost of an asset over the product lifetime, which isn’t always reflected in upfront pricing.
Let’s list the components one by one that form the “T” (total) in TCO:

 

  • Hardware acquisition
  • Software acquisition
  • Infrastructure
  • Downtime
  • Installation
  • Maintenance
  • Training
  • Support
  • Space
  • Electricity

 

05. How to calculate your ROI and TCO

cloud ANPR ROI calculation

ROI – Return on investment is a percentage value that is calculated with the following formula:

Return on investment = net gain (total gain from investment – cost of investment)/ cost of investment x 100

That is the simple formula, to give you a rough idea. For a more accurate, reliable value you need to figure out what these costs and gains would be. It’s worth taking into account that not all gains can be measured as a monetary value – however, you should take into consideration all the gains that can be measured. The following chart includes the most typical costs and gains most of which may be relevant for your business, too:

COSTSGAINS
  • Time lost while you go through the purchasing process
  • Decrease in travel budget as fewer face-to-face meetings are necessary
  • License fee if choosing on-premise software like ANPR licenses
  • Time saved in entering data multiple times
  • Specific on-premise costs, such as servers, electricity, maintenance, hardware upgrades
  • Time saved in IT maintenance and troubleshooting issues (especially if the software is cloud based)
  • Installation and IT maintenance (if on-premise software)
  • Time saved from automating processes
  • Downtime during installation
  • Improved staff output and efficiency
  • Staff training
  • Regulatory compliance improvement (meeting these regulations more easily, but also being comfortable and confident you are fully compliant)
  • Disruption in workflows – for staff and for customers
  • New revenue streams and services
  • Staff frustration and annoyance at having to learn how a new system works
  • Integrations and data migration like ANPR SDK
  • Solution support during and post implementation (if not already included in the price of the license or subscription)

 

06. An example of a ROI calculation – without the “I”

In this illustrative calculation our case entails a small-scale traffic project that must process approx. 1.2 million images per month. Typically, these are large corporate access control systems, parking facilities or low-traffic roads.

While 1.2 million images is an estimate, a low-traffic road exhibits similar numbers. Let’s assume an ideal situation when one image per vehicle is enough for successful identification: 1.2 million vehicles per month is equivalent to 40,000 vehicles per day, or 1,666 vehicles every hour (on average).

Our Head of Cloud, Tibor Zahorecz, supports that supposition. Before we dive in to the details of this calculation, he calls attention to the following aspects:

  • The costs are estimated values based on our project expertise. Some costs may be lower or higher in your country, so these should be considered industry-grade averages.
  • The numbers should be considered as an illustration and should not be applied literally for your project.
  • The purpose of these figures is rather to show you what types of costs the cloud helps you eliminate or keep in check. If you’re looking for the exact numbers for your specific projects, read below about how we are ready to help you.

The following chart gives a good depiction of how many types of expenditure are simply nonexistent when using a cloud-based solution. It’s like having no initial investment – that’s the missing ‘I’ in this ROI calculation: a key reason why businesses seek ways to transform their CapEx (capital expenditure) type of costs into OpEx (operational expenditure) for better distributing their expenses.
The difference is clearly visible from the almost empty column of the cloud-based solution, where there’s no need to consider integration expenses, hardware costs and all the arrangement of devops tasks, amongst others.

Cost

On-premise cost/yearANPR Cloud cost/year
Integration engineering cost per project
$ 20,000
Hardware costs (servers, load balancers, etc.)
$ 15,000
DEVOPS costs (maintenance, operation)
$ 15,000
Data labeling and annotation costs (human)
$ 3,500
Income loss of poor recognition accuracy
$ 80,000
Service cost of 1.2 million recognition/month
$ 9,500
TOTAL
$ 133,500 $ 9,500
Integration engineering cost per project
$ 20,000
Hardware costs (servers, load balancers, etc.)
$ 15,000
DEVOPS costs (maintenance, operation)
$ 15,000
Data labeling and annotation costs (human)
$ 3,500
Income loss of poor recognition accuracy
$ 80,000
Service cost of 1.2 million recognition/month
TOTAL
$ 133,500
Integration engineering cost per project
Hardware costs (servers, load balancers, etc.)
DEVOPS costs (maintenance, operation)
Data labeling and annotation costs (human)
Income loss of poor recognition accuracy
Service cost of 1.2 million recognition/month
$ 9,500
TOTAL
$ 9,500

Impact (gain)

Program goalNo. of cost ownersTOTAL GAIN
Labor savings (engineering & data engineering)
$ 7,000 4 $ 28,000
Hardware savings & maintenance
$ 15,000 1 $ 15,000
Customer retention gain (better accuracy)
$ 80,000 1 $ 80,000
$ 123,000
Labor savings (engineering & data engineering)
$ 7,000
Hardware savings & maintenance
$ 15,000
Customer retention gain (better accuracy)
$ 80,000
Labor savings (engineering & data engineering)
4
Hardware savings & maintenance
1
Customer retention gain (better accuracy)
1
Labor savings (engineering & data engineering)
$ 28,000
Hardware savings & maintenance
$ 15,000
Customer retention gain (better accuracy)
$ 80,000
$ 123,000

Get help with your ROI calculation

If you are about to start your project and are not sure which route to choose, don’t hesitate to contact us. At Adaptive Recognition, we offer both types of solutions and have ample experience in the project preparation phase, when we team up with our clients to solve any technical challenges they may face.

If you are open for sharing your project details with us, please include:

  • Number of traffic lanes your system will include
  • Number of cameras from which you expect images
  • Estimated traffic for these sections (number of vehicles)
  • Type of triggering system you plan to use
  • Your approximate budget for the project

Once you’ve gathered the numbers, our experts look forward to discussing the possibilities with you.

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