What is the total cost of ownership for a cloud-based solution? Every business is different and costing often must be done on a project-by-project basis. When it comes to comparing on-premise architecture with cloud-based solutions, it may be necessary to conduct a deep dive of your organization’s current costs. For an average business, cloud-based solutions such as Office 365 will undoubtedly save money over time, but the upfront investment may still be considerable.
Organizational Growth and Agility
When most businesses transition to the cloud, they’re thinking about future growth, scalability and productivity. Cloud-based solutions offer a few benefits that can be difficult to directly quantify:
- Employees can work more productively, saving the company money. Since employees can access the platform from anywhere, they can also work while on-the-go, at home and at client sites.
- Organizations can command more resources on-the-fly. During times of excess traffic, the cloud-based solution can adapt, rather than requiring the company to upgrade the entirety of its infrastructure.
- An organization doesn’t have to invest directly into support infrastructure. Most cloud-based solutions are managed and come with their own technical support teams, making an organization leaner and more agile.
While it’s easy to see savings in terms of technical support or a lack of physical infrastructure, it can be more difficult to determine the cost savings of better productivity and efficiency. This is especially true when it can be offset by issues such as initial training.
In terms of on-premise vs. cloud-based, the best comparison is to run simulations regarding the cost of growing a physical infrastructure rather than adapting to a cloud-based solution. An on-premise architecture needs to be continually upgraded: a cloud-based solution is a singular transition.
Implementation and Transitional Costs
A transition towards a cloud solution doesn’t happen overnight. Not only do the cloud solutions need to be explored and implemented themselves, but employees also need to be trained in its use. Often, data may need to be ported over and validated to complete the transition. If it’s significant enough, the company may have some downtime during the transition as well.
Yet often the costs of transitioning to a cloud-based solution is trivial compared to the expensive on-premise licenses that are commonplace for native solutions. When considering implementation and transitional costs, they must also be compared to the cost of continuing to use an on-premise solution, which often means upgraded and updated licenses every year, and on-going training.
A transition from on-premise to cloud also isn’t always a one-to-one transition: different solutions must be explored. An entire on-premise infrastructure could be replaced by a single platform, such as Office 365, or it may need to be replaced by multiple solutions: ERP, CRM, and productivity and management suites. The totality of the system must be costed when thinking of the transition.
Implementation and transitional costs are particularly important to calculate because they require upfront capital. Training and software need to be purchased, which means the company needs to have the liquidity to afford the project. Implementation and transitional costs are also a one-time expenditure, however, which means that long-term they aren’t as important as the on-going and total cost of ownership.
On-Going Maintenance and Management Costs
Once the transition has been made, the organization will switch to maintenance. The maintenance costs of a cloud-based solution are often primarily in terms of a subscription fee, as well as any support-related hours. As cloud-based solutions don’t rely upon physical infrastructure, these subscription costs are usually replacing other, larger costs such as:
- On-premise technical support.
- Server upgrades and repairs.
- Yearly licensing costs.
Most cloud-based solutions such as Office 365 have a tiered pricing structure: an organization pays for a certain number of users and a certain level of support, based on their budget. To calculate the true cost of ownership, a business will need to identify the solutions that it needs, as well as the level of support and resources that it needs.
Total cost of ownership will also vary depending on whether there will still be on-premise help desk and IT administration time allocated to the solution, or whether the bulk of support will be outsourced to the solution’s management and maintenance team. Often, a switch to cloud-based solutions can lead directly to downsizing an internal IT team or reallocating an IT team to innovative and revenue-generating tasks.
While the factors above need to be considered when calculating implementation costs, the bottom line is that cloud-based solutions will save money for the average Caribbean SME. When considering a transition, it’s important to identify the implementation costs first. The above list will provide guidelines for calculating this out for your SME and determining whether a cloud solution is right for your organization . Here at Inova Solutions, we help you assess the cost-benefit of this transition and craft a solution that is tailored to your needs.