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Orchard’s white paper, Total Cost of Ownership for a Laboratory Information System, discusses Total Cost of Ownership (TCO) throughout the lifetime of the LIS, including startup, operational, and retirement costs. In addition, considerations such as hosting your LIS and comparing an enterprise-wide solution (EWS) to a Best-of-Breed (BoB) solution are addressed. TCO involves some costs that are easy to quantitate and others that will be estimates. There are many different scenarios of laboratory IT setup, such as cloud-hosted systems or Software-as-a-Service (SaaS) arrangements. Or, the LIS may be a portion of an enterprise-wide EHR solution. These factors will influence a true TCO analysis.

Application Service Providers (ASPs)

Today’s laboratories vary greatly in their setup and testing menus. And, as mergers and consolidations take place within the healthcare system, there are health information technology (HIT) changes. More so than in the past, there are laboratories that opt to use an ASP or “hosted software.” Of course, TCO will be much different if this option is used.

In an ASP arrangement, the customer owns the software, but it is hosted elsewhere by the ASP. The customer purchases the software and pays the ASP to host it remotely in a secure data center. Basically, the healthcare organization (HCO) or lab is essentially leasing use of the physical or virtual servers. This likely involves upfront payment for implementation and training costs, then monthly rental fees for use of the data center’s equipment, bandwidth, and resources. The monthly fee is typically lower than long-term financing payments up until the finance period ends; thereafter, ASP costs are usually higher than monthly maintenance fees to account for hosting, support, and electronic delivery of the application. Additionally, should the ASP arrangement be terminated, vendors may charge for time and materials associated with “returning” your data to you. In an ASP agreement, be sure you understand what is included in initial costs and what costs are spread over the lifetime of the agreement.


Alternatively, Software-as-a-Service (SaaS) offers applications that are delivered over the Internet; customers do not actually own the software, but pay a monthly usage fee. This eliminates much of the up-front costs. New software versions are released automatically, and there is less on-site IT maintenance required. However, this option may be costlier in the long run.1

In both ASP and SaaS arrangements, it is particularly important to look at TCO because the monthly fees can add up over time to be substantially more than your standard in-house LIS. Also, for these options, it is important that you are fully aware of exactly what the monthly fee includes (e.g., maintenance, upgrades, support, etc.), and when and how much monthly fees may increase over time. Cloud computing or “Hosted Software” offers the opportunity for lower operational costs due to the outsourcing of expenses such as capital investment in exchange for a pay-as-you-go pricing model.

Use TCO to Make an Informed Choice

In today’s evolving healthcare market, it is important to make fully informed investments. Even when you know the up-front costs of an LIS or other IT system, you may not realize the full cost of the product throughout its lifespan. Calculating TCO helps you understand costs that are not as transparent as the initial purchase price, providing a more complete picture that can help you make an informed decision about the LIS that best fits your budget and your laboratory.

Download the White Paper for More Details

Orchard’s white paper, Total Cost of Ownership for a Laboratory Information System, discusses TCO throughout the lifetime of the LIS, including startup, operational, and retirement costs. DOWNLOAD NOW

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Orchard is committed to keeping you informed and being a trusted resource you can turn to for industry-related education. As always, we welcome your feedback. Follow us on Twitter at @OrchardSoftware, and feel free to respond to this post by emailing us at news@orchardsoft.com.


  1. Joseph, A. (2015, September 18). What’s the difference between software-as-a-service (SaaS) vs. hosted? VerticalRail.com. Retrieved from http://www.verticalrail.com/kb/saas-hosted-difference/