by Scott Jack
Content Contributor, E-N Computers
7+ years experience in healthcare IT and tech support.
Updated April 3, 2023
Cloud service providers promise that switching to cloud computing will bring your business greater flexibility, scalability, efficiency, and low or no upfront costs. This may sound very appealing if you are striving for rapid growth or balk at the high capital expenditures associated with maintaining your own server infrastructure. However, migrating from an existing on-premise setup to the cloud should be done with caution.
This article will help you decide whether your company should pursue migrating to the cloud. We’ll discuss different aspects of the cloud and cover the basics of calculating your costs. First, though, let’s address a key difference in paying for your own infrastructure versus paying for cloud services.
It depends. Web-based software is a great way to minimize you overhead while getting greater reliability and scalability. Converting your existing physical servers to cloud servers is not likely to be as beneficial, though.
More Than Meets the Eye
There is a major difference in the way you pay for on-premise hardware and software versus cloud services. The result is that a bit more work is required when evaluating your options. For an accurate comparison, you should look at the total cost of ownership of your on-premise infrastructure versus a cloud solution over the same period of time.
An on-premise system requires both up-front and on-going costs, while cloud services wrap all service-related costs into a single, usually monthly, rate. Your on-premise total cost of ownership (TCO) is more than just the capital expenditures every 5 years to buy new hardware. It also includes the vendor support contract, software licenses, maintenance downtime, and utility costs for the servers and their cooling over the life of the hardware. In contrast, cloud service monthly fees are based on number of users, feature tier, and the like.
If “cloud service” sounds a bit ambiguous, that’s because it is. The cloud is a range of technologies that use internet-connected servers located elsewhere. Some provide turn-key ease and others provide complete control. To show you what we mean, let’s look at the three most popular cloud service models.
Migrating to the cloud can involve several different services — IaaS, PaaS, and SaaS — with different features, costs, and benefits. See all of them at a glance in this free quick reference infographic.
Don’t have time to read it right now? Enter your email address (totally optional!) and we’ll send you a link so you can download it later or share it with your team.
Cloud Service Models
Most cloud services fall into one of these categories: software as a service (SaaS), platform as a service (PaaS), or infrastructure as a service (IaaS). “As a service” simply means the vendor provides the software, platform, or infrastructure on a subscription or pay-as-you-go basis. A full migration to the cloud could involve each type. How so?
SaaS, also known as web-based software, is a fully-hosted, ready-to-use program that does not require any server maintenance on your part. It is most often accessed through a browser on computers and through mobile apps on phones and tablets. Examples of SaaS are QuickBooks Online, HubSpot, Salesforce, Microsoft 365, and Google Workspace.
PaaS solutions give customers a complete application development environment without the headache of managing the underlying hardware or operating system. If you are building custom applications, especially with more than one developer, PaaS can be very valuable. Examples of PaaS are Google App Engine, Amazon Web Services (AWS) Elastic Beanstalk, Microsoft Azure managed services, Heroku, and Salesforce’s Force.com.
IaaS provides on-demand access to cloud resources like servers, storage, and networking that you can configure yourself much like you would your on-premise equipment. The cloud provider is responsible for the physical aspects of the infrastructure, but you are responsible for everything else. This is what you would use if you needed to convert one of your physical servers into a cloud server. The two largest IaaS providers are Amazon AWS EC2 and Microsoft Azure.
To choose the right cloud model for your needs, you’ll need to know exactly what you plan on migrating. In most cases, we recommend that our clients look for SaaS options and avoid IaaS. As just one example, you will be much better off migrating an Exchange or SharePoint server to Microsoft 365 than trying to manage your own Exchange server on Azure. For most applications that small businesses use, there is a good SaaS option available; if not, you will probably be better off maintaining an on-premise server.
When shopping around for a cloud-based software, be careful to find out whether it is truly SaaS and accessed through a browser or mobile app, or whether it’s their desktop/server application running on a remote server. In our experience, the latter is slower and more expensive than maintaining your own server, because vendors may use underpowered servers and add hefty support contracts into the price.
Now that we’ve introduced the main types of cloud services, we’re going to look at pricing. Because there are significant difference between these cloud service models, there are also differences in the way they charge. How can you calculate what each service will cost?
Cloud Cost Calculation
SaaS has the most straightforward pricing out of the three cloud models. These services are usually priced per user per month, with tiered plans to accommodate different needs. Others charge by the number of contact, client, or patient records you store in their system. Vendors may offer discounts for annual or multi-year payments. Some include an automatic price increase in their contract (Salesforce has a 7% annual increase); others may only notify you of an upcoming increase. Either way, you want to estimate your costs over 5 years so you can compare them with your on-premise TCO.
PaaS solutions use a pay-as-you-go model. Pricing is usually based on amount of time certain resources are used. For example, Google App Engine offers “instance classes” with a wide range of performance levels; each class has a fee per hour of usage that is billed at the end of the month. Your costs will depend on how many instances you have, their performance and features, and how much time you use each.
IaaS solutions are also billed based on the amount of time that resources are used. The virtual machine (VM) configuration you choose—including RAM, storage, processor cores, and bandwidth—will affect the hourly rate. With Azure, you may be able to get a reduced price on your if you already possess Windows Server licenses with Software Assurance.
Licensing is a critical consideration during cloud migration. You will have to have adequate licenses for any VMs you create on Azure or AWS. You also need to make sure that your application licensing is appropriate for use on a VM. Some software vendors will not support their application if it is running on one. A software license expert is invaluable when planning a cloud migration.
While moving to the cloud can be cost-saving and reduce infrastructure management overhead, such a transition still involves downtime and user training. Users will need to be informed in advance of how the changes will specifically affect their work, including how to access and navigate the new systems.
Microsoft 365 Pricing
Microsoft 365 is one of the most common web-based softwares that businesses pay for. Basic plans provide email service, intranet, and online storage; this is a significantly better choice than running your own email servers. More expensive licenses include the latest desktop Office apps, plus advanced security and data control features. Microsoft 365 pricing is available for businesses, non-profits, and government entities. E-N Computers is able to acquire Microsoft 365 licenses for every type of organization, including government agencies that need GCC and GCC High licenses. We procure GCC High licenses through one of our partners.
Get Help with Your Cloud Migration
Cloud migration is no small task. It involves choosing the most suitable solution, accurately forecasting costs and licensing needs, transitioning systems with minimal downtime, and proving user training and support before, during, and after the transition. Is your organization’s IT ready to manage a transition like this? Take our short IT Maturity Self-Assessment to see where you stand and begin making technology improvements.
At E-N Computers we focus on helping our clients align technology with their organizational strategy. Our goal is to make sure that technology is contributing to your success and growth, not inhibiting it. Would you like to talk with someone about how to use cloud services to your advantage?
We invite you to book a free, no-obligation 15-minute cloud consultation session with our Director of Technology Thomas Kinsinger. He’s helped dozens of our clients leverage cloud technology to improve their business—and he’s ready to help you, too. In-depth technical support is also available starting at $175 per hour.
More on IT Support Costs
If you are looking at the cost of IT projects, personnel and services in general, the following may help:
Is your business ready to weather changes, including employee turnover? Find out by taking our IT maturity assessment.
You’ll get personalized action items that you can use to make improvements right away. Plus, you’ll have the opportunity to book a FREE IT strategy session to get even more insights into your IT needs.