Do the math folks

2008: The Year that Microsoft Embraced the Cloud:
http://windowsitpro.com/mobile/pda/Article.cfm?ArticleID=101113&News=1

“Also problematic is the fact that parts of Microsoft still seem stuck in the past. The recently released Windows Small Business Server 2008 is an excellent revision to the popular SBS line, for example, but requires businesses to install and manage expensive and complex software locally. Meanwhile, many small businesses, educational institutions, and other businesses are seeking instead to offload such capabilities to the cloud, using services that are much less expensive and complex, and are managed by others.”

I always hear that but let’s do the math shall we?

20 users, of Microsoft hosted exchange and sharepoint.  No onsite domain controller, just Exchange and Sharepoint. 

Per month total of $345

Now let’s throw in $1,000 bucks for a onsite NAS or server or something to share files locally, okay? 

Grand total for 5 years is $20,700.  Plus the local storage is $21,700.  Time value of money discount factored at 5% (okay so that may be on the high side but I’m using the same rate for both computations so let’s go with it), amounts to $19,277.64.

Using the Dell SMB solution wizard…which I may say is pretty cool… http://www.dell.com/content/topics/global.aspx/sitelets/solutions/software/business/en/us/server_solutions?c=us&cs=04&l=en&s=bsd

And using it’s wizard I put in that I will have 20 users/medium email use, will use Sharepoint.. now to be fair I did not put Premium for a side SQL but Sharepoint will work just fine on the standard box

(but the cal part is a bit confusing as you have to remind yourself that there is 5 users built into the server)

The price for the hardware is

So let’s throw in $5,000 the first year for the initial install and say $2,000 per year maintenance after that just for the server because even that hosted model up above doesn’t take into account that workstation maintenance costs that need to get to that cloud and thus may need servicing as well.

After the time value of money impact is calculated total price tag is $19,976.94.  $700 is not “much” less in my book when I own the server outright from year 1.

The bottom line is just like in any statistical study you cite.  Depending on what you want to prove you can make numbers say anything.  As a beancounter I don’t buy this argument that cloud services are ‘by design’ much less expensive when doing the math depending on your needs and the number of users.  I’m seeing that in some cases it’s the same price tag or not that significantly different.  Furthermore, I ASSumed that that $345 price tag will remain constant for the next five years.  Subscriptions normally don’t in my experience. 

Oh the cloud vendors will say that I’m a dinosaur and all that, but just do the math folks and make the best decision for your NEEDS.  I don’t see that cloud services are MUCH less in price tag.  This is similar to the lease versus buy calculations.  Push the pencil and do the math.  It may not be cheaper depending on the numbers.  Go with the solution that makes the best sense for the firm, but don’t push the argument that it costs less before doing the math.

It may not cost that much less in fact.

And for the record, I still have to manage that hosted stuff with user addition and deletions.  It still doesn’t magically run itself.

11 Thoughts on “Do the math folks

  1. I guess you tied your blindfold extra hard today?

    You’ve proven your ability to take screenshots. Congratulations.

    You’ve also proven that the apple is not an orange. What a waste Susan, but good job giving hope to people that look at this world the same, they are missing an opportunity of a lifetime and maybe they’ll still visit your blog from the job once their IT business goes under for fighting to build something new businesses don’t actually want.

    -Vlad

  2. The thing that bugs be about hosting is that host site admin on the night shift who gets bored at 2 AM in the morning and decides to start poking around in my data. The host people really need to prove to me that they can prevent “bored admin syndome”…

  3. bradley on December 23, 2008 at 4:44 pm said:

    No Vlad I haven’t. I’m saying go into this with your eyes open and not just listening to the cloud vendors and pundits.

    Choose a solution that makes sense for the firm’s needs . But this isn’t a one size fits all either way.

  4. You forgot to add the bandwidth cost to get to that hosting solution.

    ADSL/T1 is generally adequate for an onsite box, but getting to a hosting solution where you need to transfer large data sets means that SHDSL/T3/direct Ethernet becomes less of an option and more of a requirement.

    This gets very expensive if you’re in a place like Australia.

  5. Jim Maher on December 23, 2008 at 8:18 pm said:

    Good analysis of the numbers. There’s more to the decision, but it really SHOULD start with the numbers.

    I’ve worked through two previous cycles of “service bureau” outsourcing. Many of those apps were brought back in-house, but not all.

    The pendulum is swinging towards the cloud. It’ll swing back, eventually and somewhat. But some people will like it out there, at least for some things. And the internet, SaaS and vast numbers of highly capable data centers provide today’s out-sourcers with far better capabilities than the last two “service bureau” waves enjoyed.

    We really need both capabilities. Cloud for some, in-house for others.

    I’ll muddle along, as I always have, trying to help my clients find the right solution – or mix – for their needs.

  6. Soren Vang on December 24, 2008 at 2:06 am said:

    Cloud computing looks ok for SBS sized companies, but what about bandwidth and connectivity failiures. I wouldnt like to be resposible for choosing the Cloud way on the days of internet outage. And dont just say “redundant internet connections” – its not that easy. The redundant connections would have to be split between wired and wireless and that can become quite costly for a SBS sized company.

  7. @susan: if you have a resource that are willing to come to my site and manage my server for 5k initial and 2k/year, i’ll take 5. Right now, if i wanted to stand up my own exchange/sharepoint environment, step 0 would be to hire a full time infrastructure admin, and a straight-out-of-college CS major is going to hit me up for 50k/year.

    then, what happens if i’m successful? what happens if my 5 employees balloons up to 25? then 50? branch offices? then 250? unified communications? how much more IT staff do i need?

    @soren: when the office connection goes down, everyone whips out their webcams and works from home. 😉

  8. In my own office I’m not a full time admin and I’ve stood up a Exchange/SharePoint environment.

    You are also saying the line that I see many vendors spout.
    “What if the firm is successful and grows”. What if the firm is successful and stays in the same size range? Microsoft and every other vendor equates employee growth with success. Show me many a small firm and we choose to stay this size.

    I know more than a few that can manage a server in this fashion.

  9. Chris to stand up an exchange/sharepoint environment take the sbs 2008 media, answer a few questions, hit next, go to bed while the server builds. Wake up the next morning and finish the to do list.

    It takes me just as long to fill out and provision the Online Exchange stuff, but I don’t get the overnight sleep.

  10. Thank you Susan for presenting this viewpoint.

    I congratulate you for presenting the alternative viewpoint that you have, that speaks over and above the marketing hype that we consistently hear about.

    For me the main sticking point is privacy. I would never put my internal documents, intellectual property, customer lists, etc. on a hosted site no matter what, despite the fact that we could greatly benefit from such a solution, having 2 offices and a 16 hour-per-day operation.

    For instance, document sharing and shared CRM among the offices is an area that a hosted solution could benefit us – but I’d much rather the current topology (secure VPN, internally hosted everything and even a painful Goldmine sync) and overhead in maintenance than relinquish control by going to the cloud.

    It’s about time that sanity prevailed instead of hype. Thanks for a breath of fresh air.

  11. Vlad Thurrott (yes I kow it’s 2 differant people) can’t get pass the Mirosoft incentive program, get a clue most (at least my well informed clients) will not risk critical metadata in the cloud, the cloud may indeed be appropriate for certain types of SMB’s but it’s not the be all solution (As Susan rightly points out) Inform client’s as to all alternitives, show them the risks, costs, and performance, a well informed client can indeed make a good decision. Honestly the consaultant retains their clients no matter what they use as long as you to support them and guide the process through.

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