Cloud Solutions for your Business Communications: What does it really cost?



Cloud Part 2



In an earlier post we explored the need to truly understand who your cloud provider is and what happens if they are no longer around or you decide to make a change.  In the second of this series we will look at the cost of cloud services and whether they live up to their claim of being a less expensive way of doing business.  In looking at costs you need to consider total cost of ownership.  This is defined as the cost of a particular solution over a period of time which is appropriate for your business.

For a traditional or “premises” based solution, you need to consider the cost of acquisition, installation and support, including ongoing licensing costs. For a cloud-based solution you need to look at the cost of installation, monthly payments and service and support.  You should fully consider the cost of supporting a premises based system (space, cooling, updates and support).   Consider your organization’s normal IT refresh cycle to determine the time frame you should be evaluating.  Many cloud services tout converting capital expenditures into operating expenditures, and this may be a valid consideration for large public companies, but in my experience spending is spending and the key consideration is how much money you will spend to support a solution over a period of time.  Sure, $50 a month per user doesn’t sound like much, but if you have 10 users, over a period of three years your outlay is $18,000!   Once you can see the TCO, you can start to evaluate the intangibles such as access flexibility, support and other considerations and then you can make an appropriate cost benefit analysis.

Here are two illustrations.

Microsoft Office™:

Microsoft offers Office™ in a cloud version called Microsoft 365™.  It also offers Office as an installed program.  Let’s assume you have determined your lifecycle for MS Office is 36 months – in other words you would pay for an upgrade every 36 months.

Microsoft offers Office 365 Small Business Premium (cloud) which includes Word, Excel, PowerPoint, OneNote, Outlook, Publisher and Access.  For a five user package the cost is $150 a month.  Over a period of 36 months the cost would be $5,400.

Office Professional 2013 includes essentially the same products, but is licensed and installed on a work station. A single license of this software is a one-time $400, or $2,000 for five users.

Of course you would need to weigh the advantages of having an “always current” system with the cloud version, as well as the convenience of being able to access your Office suite from wherever you have an internet connection. You would also need to consider that after 36 months you might need to license a newer version of the Office Suite.  Every business has different needs and a careful analysis of all the costs versus all the benefits would be necessary to pick the right solution for you.

Hosted Telephones versus a Telephone System

Hosted telephones have been around for decades.  Before the advent of VoIP, telephone companies offered a hosted service called “Centrex”, where the idea was to connect your individual telephones to a central, telephone company hosted PBX which would then provide access to various telephone system features and to telephone lines.  Today there are a plethora of companies offering essentially the same service, but using VoIP technology and the internet to connect telephones to a “hosted” telephone system, instead of copper lines.

A quick word to the wise here.  The quality of hosted telephone services varies widely and there is also a wide variation in quality of support.  If you decide a hosted solution is best for you, be very cautious in selecting your provider.

To present a reasonable comparison we are going to use a reputable national company’s pricing and compare it to the cost of a similarly equipped premises based telephone system and lines.  For this illustration we are assuming a system with 8 telephones and 4 lines, plus one fax line.

Hosted VoIP-

Monthly cost for 8 telephones, voice mail, automated attendant, directory listing and a fax line.  First year  – $435.  Second and third years –  $301.  One time set up costs: $275.  Total 36 month cost:  $12,719, or $44.16 per station per month over the term of the contract. And this is for a product which has an advertised cost of $28 a month.

Premises VoIP-

To determine the 36 month cost of a premises based telephone system, we calculated the equipment cost, including installation and a 36 month support and service plan, leased on a 36 month lease.  To that we added the cost of telephone lines for a reputable carrier.

The total cost of this solution over 36 months was $6,336 for the system, service and support, and $4,140 for telephone lines.  Total cost of ownership $10,476, or $36.38 per month per station.


You must carefully evaluate the total cost of ownership of whatever solution you are considering and then weigh the difference in cost against the benefits you perceive for each solution.  Sorting through these choices can be tedious and technical so choose an advisor who is competent and who you can trust.  At Canyon Telecom we offer both hosted and traditional voice solutions and we offer a no cost, no obligation evaluation of your options.

Next:  How Secure is Your Data in the Cloud?