CLOUD VS. ON-PREMISES: COST COMPARISON (PART THREE)
In Part One of this blog, we talked about your general approach to a cloud vs. on-premises evaluation, based on your business environment. In Part Two, we listed some of the software costs that play a part in such an evaluation. In Part Three, we continue listing those factors, beginning with server costs. Please note that factors (f) through (r) are only applicable to on-premises systems:
f) Server setup: If you need a new server to accommodate your new on-premises application software, what are those 
hardware and IT costs?
g) Storage costs: What are the costs for additional storage hardware?
h) UPS: What are the costs for additional uninterruptible power supplies for your new server and related hardware?
i) Environmental costs: What is the cost of any additional air conditioning required by your new server?
j) Server room cost: Do you have an existing server or equipment room? Will your new server fit into that room? If not, what is the cost of dedicating a new server room?
k) Disaster recovery: Do you have existing and adequate data backup for your new server? You should be storing backup data offsite. Are there any associated costs?
l) Power costs: How much does it cost to run the additional hardware?
m) Firewalls, routers, new modems: Are any of these required for your new on-premises system? How much will they cost?
n) IT staff: Is the addition of a new server going to place a heavier demand on your IT staff? Is that going to factor into the additional annual cost?
o) Hosting fees: If you are going to host your server, how much will the hosting service charge you to accomplish that?
p) Cost of money: Don’t forget to factor the cost of money into your financial analysis.
q) Insurance costs: Will the new equipment cause your insurance premiums to rise?
r) Depreciation: You must factor this into your financial analysis. It can be substantial, for newly purchase equipment amortized over a three to five year period.
s) Conversion costs: This is an important factor, it can be substantial, and it will likely differ between systems. Prospective providers will almost always want to quote you an hourly rate for your data conversion and will be reluctant to give you a fixed price. They’ll say that they can’t be responsible for the quality of your data or for unforeseen issues. They’re right, to a certain extent, but ask them if they’ll give you a fixed fee for the data conversion if you pay them upfront to perform an analysis. Such an analysis will likely be 3-4 hours of work, and it may cost you as much as a thousand dollars, but it might be the best investment you’ll make in minimizing your overall implementation costs. Your prospective providers will usually be happy to reduce their implementation fee by that consulting amount if they’re lucky enough to sell you a system.
Once you have isolated all the costs associated with the cloud solution and the on-premises solution of choice, you can now perform a financial analysis, which will let you know if and when your new software solution will be pulling its own weight. That’s discussed in an upcoming blog.
About the Author
Doug Deane is President of DSD Business Systems, an international provider of on-demand (cloud) and on-premises ERP and CRM software, specializing in wholesale distribution, manufacturing, warehouse management, inventory, business intelligence, and eCommerce software. DSD offers NetSuite Cloud ERP, NetSuite CRM, NetSuite eCommerce, Sage 100 ERP (formerly MAS 90), Sage 300 ERP (formerly Accpac), Sage 500 ERP (formerly MAS 500), Sage FAS, Sage HRMS (formerly Abra), Sage CRM, Sage SalesLogix, Sage Add-Ons (Extended Solutions), and Custom Programming. DSD has been a multi-time Sage President’s Circle award winner, a two-time Sage Gold Development Partner of the Year recipient, has been recognized by the San Diego Better Business Bureau (BBB) as a Torch Award Finalist (2009) and Torch Award Winner (2010) for Marketplace Ethics, and has been recognized by the Council of Better Business Bureaus as a 2012 International BBB Torch Award Finalist for Marketplace Excellence.
