Total Cost of Ownership (TCO)

“Nothing is more powerful than an idea whose time has come” – Victor Hugo

Now I’m fairly certain Victor Hugo was too busy penning classics like “Les Miserables” and “Hunchback of Notre Dame” to be concerned with Information Technology but if you’re the Finance Director, Managing Director, CFO or simply in charge of your companies purse strings, one of the major benefits of the advent of Cloud Computing has been to reduce the Total Cost of Ownership (TCO) for your business’s IT infrastructure.

I’m going to explain a little about traditional IT infrastructures, compare them with a typical cloud-based solution and demonstrate from a typical example the cost benefits to be gained from businesses moving their IT estate into the cloud.

Traditional IT Infrastructure

In a traditional IT setup within a SME you have to consider the capital cost of –

  • servers, networks and workstations
  • installation and integration of hardware and software
  • licence costs
  • time taken to research purchasing requirements
  • depreciation and electricity costs over the lifetime of the infrastructure

Depending on the size of the IT estate this can of course mean substantial peaks to the capital outlay of the company that has to be planned for and managed very carefully. It also means that over the lifetime of the infrastructure you run the risk of being behind the technology curve if new developments are introduced in that timeframe. Given the speed that the IT world moves that scenario is highly likely.

This can mean a potential loss in competitiveness which can impact the bottom line.

Cloud Based IT Infrastructure

High speed broadband networks have changed the landscape of business and offered more opportunities for how businesses can organise their IT to best leverage these opportunities. The following are a number of ways that the cloud is changing the way we operate.

  • Virtual Servers can be deployed in minutes allowing demand to match capacity. In a traditional approach the system is normally specified to cope with times of peak demand which means that the expensive capital equipment is under utilised for most of the time.
  • Software can be licensed on a subscription basis (Software as a Service – SaaS). Licence fees for traditional boxed products can be expensive (e.g. Microsoft Office) and of course you can then find your staff using different versions depending on when they were purchased. Subscription software means that your staff are using the same version and automatic updates ensure everyone is using the most up to date versions.
  • Due to high speed broadband you can utilise thin client workstations that use your normal software applications (e.g. Office) via cloud-based servers with no discernible loss of performance. Consider a moderately spec’d desktop/laptop priced around £700/unit compared with a thin client terminal that can be deployed at around £100/unit
  • Security can be tightened and controlled by easy deployment of patches at server level rather than having to update every PC in the organisation separately.
  • Backups can be stored more securely (no more messing around taking hard drives off site on a nightly basis) and subsequently disaster recovery exercises can be be measured in hours and minutes rather than days.

 

Cost comparisons – example

 

Let’s look at a small office environment that has one in house server and 12 users with desktop machines running normal business applications such as email, accounting software, spreadsheets and word processing software. We will also assume that the IT estate is replaced every 5 years so the pricing is based on what you would pay over 5 years.

 

Traditional v Cloud Based

  Traditional In-house solution Cloud Based Solution
Server & Licensing £12,000 £15,000
Support £18,000 £12,000
Replacement PC’s £12,000 £1,200
Running/Storage Costs £5,000 £0
Total £47,000 £28,200

 

As you can clearly see there are potential savings to be made by moving to the Cloud.

Savings aside you should also consider the other potential benefits to your business of implementing a cloud-based setup that we touched upon earlier such as avoiding capital expenditure “spikes”, flexibility of operations for your workforce and security and business continuity improvements.

If you think that reducing the total cost of ownership is something that you want to know more about then get in touch with the team at Broadband Cloud Solutions and we’ll be happy to help answer any questions you might have on moving to the Cloud.