In my previous posts I have been discussing what the Cloud is and some of the preconceptions people have.
In this post I take that a step further and discuss the cost of Cloud Computing. I recently ran a small poll on LinkedIn asking if people preferred to rent rather than buying, (I guess the underlying question is do people prefer the cash flow delivered from renting over the perception/possibility of saving money through ownership), now I was not specific about what was being rented, although it linked to a Wired article which discussed renting things such as Pets (!!!) through to Cloud based systems. The poll results were as I expected a 50/50 split, and to be honest this is where I stand on the subject as well, there is just too much circumstance to make this an easy call. In this post I am going to run through a couple of very simple examples, but then at the end I want to leave you with a few thoughts as the use of the Cloud can be more than just a £ game.
So let’s start with a system for a business of 5 users where the ideal setup would be a central email and calendaring system accepting emails on your business domain.
|On Premise Solution||MS Exchange||Cloud Solution||Google Apps for Business|
|Software Requirements||MS Small Business Server||£600||Google Apps for Business Licence (*5)||£165|
|Hardware||Medium Sized Server||£1000||£0|
|Maintenance (patches etc)||20% PA||£320||£0|
|Total Cost First Year||£1920||£165|
|TCO 3 Years (5 Years)||£2560 (£3200)||£495 (£825)|
|Cost PA||£853 (£640)||£165 (£165)|
Throughout these examples I will make some assumptions, these include assuming the cost of training is the same for both and therefore excluded from a comparison, that after 3/5 years the on premises solutions will need a re-investment to an extent of starting again, and that the PC’s required are the same, in reality the On Premise PC’s are likely to require more investment.
But Offices are more than just Email, so now lets add Document and Spreadsheet creation and also a CRM package.
|On Premise Solution||MS-Office and Sage CRM||Cloud Solution||Google Apps for Business and Zoho CRM (medium package)|
|Software Requirements||MS Office Standard (*5)
|Google Apps (*5) (Already owned)
Zoho CRM (*5)
|Hardware||Medium Sized Server (already owned)||£0||£0|
|Total Cost First Year||£2250||£450|
|TCO 3 Years (5 Years)||£3000 (£3750)||£1350 (£2250)|
|Cost PA||£1000 (£750)||£450 (£450)|
|Running Total||£1853 (£1390)||£615 (£615)|
Admittedly Google Apps for Business may not be suitable for every business, if that’s the case you could look at a hybrid such as Office 365 from Microsoft.
Final I am going to add in some document storage, again I am going to use Google Apps as this is where my business data is stored but there are any number of different services for document storage.
|On Premise Solution||Existing Server with 50GB available to each user||Cloud Solution||Google Drive|
|Software Requirements||£0||Extra Storage (50GB per user)||£285|
|Hardware||Medium Sized Server (already owned)||£0||£0|
|Total Cost First Year||£200||£285|
|Total Cost over 3 Years (5 years)||£600 (£1000)||£855 (£1425)|
|Cost PA||£200 (£200)||£285 (£285)|
|Running Total||£2053 (£1590)||£900 (£900)|
So the final costs
On Premise: £2053 per annum over 3 year or £1590 over 5
In the Cloud: £900 per annum over 3 years of £900 over 5
So looking at it very simply it’s a no brainer, however if you have a legacy app such as an accounting package that cannot be moved, a lot of your cost will still be required even if you did move other functionality to the cloud. If we were to assume the £853 pa for the Small Business Server had to be invested for this one legacy app then the figures become much closer and over 5 years the difference is just £50 pa, finally you should not underestimate the cost to move to the cloud, looking at both these scenarios the On Premise solution would win based on just cost. So if you are a start up business using Cloud Computing is a simple decision, if you are an established business with legacy apps, an investment in infrastructure and lots of on premises data and information it becomes a lot less clear. However even if the simple maths does not work there are the non tangible things you have to consider of the Cloud.
- Flexibility in Scalability: As you pay per user the system grows as you do, users can be added and removed at the click of a button.
- Cash flow: As users can be added and removed at will and therefore paid for at will, cashflow is not hampered by swings in staff or large expansions.
- No large upfront capital outlay or ‘end of life refresh’ outlay for hardware and software.
- Flexibility of Work: Whilst work life balance has to be considered the ability for staff to work from home or whilst travelling can be very advantageous to both the business and the staff.
- Reduced Down Time: No system is resilient to downtime and outages but Cloud systems have experts monitoring for issues 24/7 with quick fix times.
- Collaboration: Cloud systems are built around collaboration allowing users to streamline their team working process. As an example, it’s not unusual for team members to send reports around each adding, reviewing and amending as they go, at the end of the project there are multiple copies on multiple machines leading to confusion. With a Cloud solution you could create a team workspace where everyone works on the same document, perhaps at the same time!.
- Reduced exposure to lost time/money through hardware loss/theft.
- Patching is handled by the Cloud supplier, your systems are therefore always up to date with little or no downtime and at no additional cost.
- No Cost Upgrades: As you are renting the Software as a Service all upgrades are supplied within your rental fee, no capital outlay to update in the future and you always have the most recent version.
Hopefully, you now understand the huge savings that can be delivered from Cloud based solutions, but any decisions should be made with the business process and strategy in mind.
My final post in this five part series will look at some of the apps available out there in the Cloud.