Take
a good look at those servers sitting in that closed room at the end of your
office hallway. They’ve probably given you a lot of good service during the
last few years. Think of all the data you’ve processed and stored there, not to
mention the applications that ran on them every day. Have you ever stopped to
wonder how much time and money you’ve invested to keep those machines running?
You might be surprised by the numbers if you did. There’s a lot of talk
about cloud server solutions these days and you might be tempted to
take the leap. But, before you make any kind of decision, you should have a
clear idea of what you’re spending now and how it compares to the price of
cloud solutions.
The
first thing you have to do is look beyond the initial costs of an in-house
solution vs. the monthly cost of the cloud. The real picture of what’s cheaper
goes far beyond the cost of a new in-house server or an annual subscription to
cloud servers or Infrastructure-as-a-Service.
Look at ongoing costs instead. What are you really paying to operate, maintain and upgrade an on-premises solution over its lifetime (usually a five-year period)? What other costs are involved in a cloud solution? Only then will you be able to make a sound decision. Need to know the total cost of your infrastructure right away.
Five-year price comparison
Look at ongoing costs instead. What are you really paying to operate, maintain and upgrade an on-premises solution over its lifetime (usually a five-year period)? What other costs are involved in a cloud solution? Only then will you be able to make a sound decision. Need to know the total cost of your infrastructure right away.
How to
calculate total cost of ownership of servers
The
best way to calculate the cost of ownership is to take a look at all your
costs: direct, indirect or hidden. Here’s a breakdown, in case you’re wondering
what we’re talking about. Direct costs are linked to any of the hardware
required for an on-premises solution. This can range from your actual servers
to the server room where you store them. It also includes electricity and HVAC
(heating, ventilation and air-conditioning). On the other hand, indirect costs
are related to the salaries you pay your System Administrator and any other IT
staff member who maintains your hardware or fixes software bugs. And hidden
costs? Lost productivity due to downtime is a good example.
How much does it
cost to move to the cloud?
No
matter which costs you want to analyze, our cost calculator tool can help. It
evaluates all the factors involved in building your own solution and compares
that with the overall cost of the cloud.
How
much vCPUs, RAM and disk space do you need to run your operations? Using our
cost calculator tool, we entered sample amounts of resources that most SMBs
would use every month (2 vCPUs, 8GB of RAM, 512GB of disk storage). Then we
played with the uptime target numbers to reflect a typical SMB situation. We
looked at availability and what this meant for downtime hours each month. The
numbers vary. Some providers offer 98.0% of availability, which equals about
14.4 hours of allowed downtime per month.
A respectable on-premises
solution is also around that previous percentage, so when you compare to
switching to the Cloud, you can start with that data as your guaranteed uptime.
On the other hand, other providers give their customers a service-level
agreement of 99.9% of availability. This means only about 44 minutes of
downtime a month. After all, downtime is a hidden cost for your business. When
your site is down, your data is unavailable. In 2017, every hour of
downtime cost organizations $100 K 000 on
average. In May of that same year, a power system in British
Airway’s data center failed. The result was a loss of approximately $68 million in fare refund followed
by a drop of 2.8% in stock prices. The higher the percentage of
availability, the better up time your site has and ultimately, the better it is
for your business.
In
our scenario, and using our tool, we took into account the recommended hardware
refresh rate for an on-premises server (generally 3-5 years). As part of our
price comparison for cloud servers, we set the refresh rate to 48 months. Most
in-house servers would start to lose their ability to adapt to increasing
workloads after four years. However, with a cloud server, you can scale your
resources up or down to suit your needs. Finally, we entered another important
indirect cost: the average annual salary for a system administrator or
technical employee. For this example, we used an average number of $61,000.
That number was rounded off from a researched by Payscale.com
The
tool calculated that the average cost for this on-premises configuration would
be $1,476.31 a month. In contrast, the monthly cost for a cloud server with the
same configuration is $313.90. This translates into an average monthly saving
of 79%. The total cost of ownership tool also
displays tables and graphs which compare this on-premises solution to a cloud
solution proposed by LATVIK.
Five-year price comparison
Let’s
assume that you refresh your infrastructure every five years. You’ll buy your
new server in the first year and as we mentioned, you’ll replace it in the
fifth year. Our tool calculated that over this five-year period, a
company would save an average of 79% in its IT budget by opting for a cloud solution.
Back
to our calculations. In the first and fifth years of the cycle, your expenses
include server installation, configuration, initial maintenance and support.
But, if you have a cloud server, your staff would spend little to no time
dealing with these tasks. That’s why in our example, the company saves 90% in
the first and fifth years with a cloud solution. For years 2-4, the costs for
both on-premises and cloud solutions are limited to maintenance and support.
The costs linked to hardware, such as HVAC, aren’t necessary with a cloud
solution. Consequently, the company saves up to 58% with cloud servers.
TCO: Understanding
the big picture
A
number of key elements should be included in your decision-making process, such
as system uptime, technical support, redundancy in case of power failure and
the costs involved in refreshing your servers. Most companies replace their
on-premises servers every five years. Wait any longer and you might regret it.
It could be more difficult to find spare parts or do necessary upgrades. Or,
your server might become too slow and inefficient to deal with spikes in
demand. Electricity is also a major factor. As we mentioned earlier, power is a
direct cost, and an important one at that! +
A recent article by ZDNet showed
that in the U.S., it costs about $731.94 per year to run an average server. If
you have several on-premises servers, that could translate into a big
expense. Price is one thing, but it’s also important to factor in
the value you’ll get
on top of the price tag.
What
other things should you consider? All the gravy that is provided by cloud
servers that you don’t necessarily get with an on-premises solution. With
Infrastructure-as-a-service, the data centers hosting your solutions are usually
better maintained, updated and upgraded compared with what you’re running in an
on-premises environment.
Next up is security. Most data centers running cloud
solutions are Tier 3+ and subject to stringent security regulations. In other
words, your data will be the safest it can be. Your closest won’t even compare!
We’ve talked a bit about hardware and software, but here’s the deal. The
platforms used in cloud solutions are regularly updated to conform to industry
standards. That’s another thing your business won’t have to worry about. You
don’t even need to pay the System Admin doing the work, it’s all included in your
price. And if you have any questions? Most providers offer free technical
support.
So,
crunch those numbers. If you don’t understand what your five-year TCO looks
like, you’ll never be able to make a valid comparison of in-house vs. cloud
solutions. Our TCO calculator below will help you get a grasp on your numbers.
Want
to find out more about the total cost of ownership for cloud servers? Download
our free cloud cost estimator here. Do the math yourself and
make the right decision for your business!
Need More Information Contact Us
Best Regards ,
Latvik Blog Team
LATVIK TECHNOLOGIES ™
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