You can easily find dozens of articles on the internet exploring the differences between installing software locally or subscribing to a cloud version.  In almost every case, the cloud version of the software is presented as a more cost effective solution. While this article is no different, the goal of this article is to layout some information to help you make a more informed decision.  Let’s take a look at the various items that make up Total Cost of Ownership of software.

Obvious

Many people incorrectly assume that the price of the software and its related maintenance and support fees, are the true cost of the software.  But there are several other costs that just about everyone should be able to agree are directly related. Server capacity, operating system licenses and storage availability quickly come to mind.  The need to update server capacity whether it is storage space, computing power, or licensing (operating systems, antivirus, backup software, intrusion detection, etc) is easily quantifiable when you are installing on premise.  Implementing a cloud based service makes all of these functions the responsibility of the cloud provider.

If you currently have sufficient server capacity for the new software package, and are committed to the hardware upgrade cycle, maybe the cloud isn’t the winner.

Less Obvious

The costs of the added burden placed on your IT staff may be nominal or fairly significant, but are frequently more difficult to associate directly with an individual software purchase.  When you choose to install software on premise, you are assuming the responsibility of updating not only that software, but the related software (SQL Server, .Net Framework, etc) as well as the hardware used to run it.  Each of these tasks require time from your IT staff. Migrating software from one server to another can be time consuming and frequently must be performed during non-business hours. If you have outsourced your IT staff, after hours tasks may incur additional charges.  Implementing a cloud based service makes all of these functions the responsibility of the provider.

If your IT staff is currently underutilized and is looking for new projects, maybe the cloud isn’t the winner.

Hidden

Lastly the costs associated with the risks you assume with having software installed on a local server are the most difficult to quantify.  Disasters of all sizes cost money. Some of those costs are direct, like rush shipment of replacement hardware. It is difficult to associate a dollar figure with lost productivity and lost information, but these are real costs nonetheless.  Some companies choose not to spend money on readily available replacement hardware or redundant equipment. In many cases, this gamble pays off as the costs of the disaster is less than the cost of preventing the disaster, but as the software becomes more integral to your daily operations, that can change.  Implementing a cloud based service makes all of these risks the responsibility of the provider. As a matter of fact, cloud providers spend more resources on preventing disasters than any small or medium sized company could or should.

If your company is comfortable with these risks, maybe the cloud isn’t the winner.

Conclusion

So why, given all of the above, do software companies want to take on these added responsibilities?  We spend time, money and energy on these things because there is value to you. We think we can provide these services to you more cost effectively than you can provide them to yourself.  IT is our business. Is it yours?