IT Budget Analysis – On-Site Computer Network vs Full Cloud Environment

In this article, we will try to compare the cost of a traditional on site computer network with servers and PCs to the new full cloud environment discussed in the article published last month. As you will see from this analysis, right now, full cloud computing is not less expensive than the traditional method, but it does not require any initial capital spending either. In order to do this analysis we will have to make some assumptions, if you want to make other assumptions, you can download the spreadsheet from my website and change them and see what it does to the final numbers. Here are the assumptions we will make today.

Traditional Environment Description

For our example we will assume that you have an office with twenty-five PCs and two Servers. One is a file server and the other is an Exchange Email Server. You have standard Microsoft Office installed on each PC and one or two lines of business applications such as an accounting package, a CRM or some other custom database. We will assume that you have an outside IT Support vendor that is charging you $ 2,000 per month for complete IT Support and monitoring. You also have a good onsite/offsite backup solution that you are paying $250 per month for. You refresh your PCs and servers every five years and keep the servers under full manufactures warranty the entire time that they are in service. We also will assume that you keep your systems protected with up-to-date anti-virus software and you protect your email from viruses and spam with email filtering. The scenario described above shows a company who does all the things they are supposed to do to ensure a smooth running network. Companies who do these things typically do not have to worry about their IT needs; they pretty much rely on their IT vendor to take care of everything. Here is a table showing the cost of all of these items that we will be including in our model of the traditional PC network.

Traditional PC/Server Network Assumptions

• 1. File Server Price – including software $6,500
• 2. Exchange Server Price –including software $8,500
• 3. PC Price – medium performance $700
• 4. Price per server per month for support $300
• 5. Price per PC per month for support $70
• 6. Monthly backup system price $250
• 7. Monthly email filtering per user $2
• 8. Yearly Anti-Virus subscription – 25 users $650
• 9. Life of a Server and a PC 5 years
• 10. Life of a dumb terminal or old PC 8 years
• 11. Price of a dumb terminal $300

Cost Comparison Analysis

Traditional Servers / Workstations
Monthly						Prices
Managed IT Support Services – Servers						600
Managed IT Support Services – Workstations						1,750
Monthly Price of Server						404
Monthly Price of PCs						77
Office Space Cost – Servers						18
Power Costs Servers						30
UPS – Power						13
Monthly BDR						249
Microsoft Office Monthly						4
AVG Monthly						83
Totals						$ 3,229
Monthly Per PC Price						$ 129
Cloud Services Monthly
		QTY			Monthly	Total Monthly
Flat Monthly Fees		25	PCs @		$ 200	5,000
Hosted Exchange		25	Users @		10	250
Redundant Internet Service		1			120	120
Price of Terminals/old PCs		25			3	78
Total Monthly						$ 5,448.13
Total Monthly per PC						$ 217.93
Difference Monthly						$ 2,219
Difference Monthly per PC						$ 89

As you can see from the analyses above the cost of the traditional onsite computer network, including full support from an outside IT Support firm, will cost about $ 3,300 per month. And the Full Cloud model will cost about $ 5,400. You can, of course, change any one of the variables and change these numbers. The biggest number that is open to change is the price per PC for the full cloud solutions. I have assumed $ 200 because I have not heard anyone charging less for this for full support and all the virtual machines and software etc. The other big conclusion, at least at this time, is that factors aside from financial ones will be motivating the early adopters of cloud computing. Companies who want to jump in to full cloud computing now, will most likely be motivated by the need to tie everything together with easy access from multiple remote locations. Companies who have a large percentage of their staff operating in remote locations and not working in the main office regularly will see the benefits right away. Everyone will be able to have their same desktop with access to share resources no matter where they are. It will function just like an office network where everyone is in the same place. The can have this access from home, from the road, at a diner, on the train, on vacation or anywhere else that the internet is available. This will be particularly attractive to new startups or companies who are moving their offices. If you are in this situation, you are able to rethink the entire office model. The old model where every employee reports to the office is starting to become outdated. One of the original reasons that businesses were run this way is because all the resources could be gathered in one place and people could all work together with them. Now, with cloud computing, this is no longer necessary. Once you drop the idea of creating a place for every employee in the office, you can more than offset the added expense of full cloud computing. If you can make your new office two thousand square feet instead of four thousand, you can save half on rent and utilities. Our company is not even using full cloud computing just yet, but we are operating like this. Our office is about half the size it would need to be if everyone worked there. As I am writing this book now, I am saving the work on my hard drive at home, which is automatically synched to the cloud drive. When I go to the office, I can pick right up where I left off. Anywhere I go I can access my email, telephone and PC. I often have to travel to the Caribbean for business and I always bring my laptop and my Cisco IP phone. I plug it into the hotel internet, and I have my office phone and full access to my programs, files, email and calendar right there in my hotel room overlooking the ocean. Of course, at the end of my trip I pack it all up and set it back up in my office in the basement of my Pennsylvania home with no view. But if I get tired of that I can take my iPad and phone out on the deck and work with a nice view of the farms. When I need to meet with the guys I can always take the hour drive and go to the office and work on any open desk there as well. To summarize, you can see that this business of calculating the costs can be a bit tricky and you will need to count all the costs. You may even need to rethink the whole setup of how you get things done and how you and your staff work together. Even if you do not go for full cloud computing, you can still use this technology to radically change the way you and your staff live and work.