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The real cost of on-premise solutions

Considering that many business systems are moving to a cloud model, does it make sense to stay with an on-premise communication system? Here are five factors to consider when comparing the total cost of a premise-based solution to a cloud-based one.

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the real cost of on-premise solutions

Until just a few years ago, purchasing a communication platform for your enterprise involved a large capital expense, additional equipment in a server room and (potentially) extra human resources to maintain the system. On-premise systems were the only way to stay connected internally and externally, so companies found the budget and hoped the systems would last 10 years or more.

Cloud computing has opened a whole new world of opportunities for companies looking to implement a new communication platform. While the era of on-premise systems may not be quite over, cloud communication platforms are on their way to becoming the standard across the business landscape. Considering that many business systems are moving to a cloud model, does it make sense to stay with an on-premise communication system?

Below are five factors to consider when looking at the total cost of an on-premise solution:

OpEx vs. CapEx

On-premise solutions require a large capital expense upfront — tens of thousands of dollars or more, depending on the size of the system. But cloud solutions are priced as an operating expense, allowing companies without large capital budgets to implement a new, state-of-the-art solution at a very low cost.

Business continuity

Downtime costs money. In one survey, 98 per cent of organizations said that a single hour of downtime could cost $100,000. When that hour extends to days or weeks, the cost could mean closing the doors of the business for good.

On-premise solutions do not provide the most robust business continuity options. Because they are more vulnerable to last-mile events than cloud solutions, it’s far more likely for on-premise solutions to experience outages. In addition, even if the on-premise solution is still up and running, employees who can’t get to their desks because of disruption will lose functionality and may not be able to keep working.

On a cloud platform, everything is managed offsite, and cloud providers have the kind of redundancy that reduces the risk of downtime to almost zero. In addition, when the office is inaccessible, employees have more options for remote work without giving up any functionality.

Customer interaction options

When customers request new options for communication, on-premise solutions may not have the technology to meet those needs. Older premise-based systems eventually become outdated and unable to handle new apps or software. A recent survey indicates that 48 per cent of customers who can’t reach a company through their preferred communication channel will go to a competitor.

Business owners know that it costs far more to replace a customer than to retain one. If your system can’t keep up with customer demands, how many customers will you lose to the competition? Only cloud solutions provide the state-of-the-art options that allow businesses to keep up with customer and market trends.

IT productivity

An on-premise communication solution usually becomes part of the IT department. When IT professionals spend time maintaining phone systems, they can’t spend time on other initiatives. With cloud solutions, upgrades and maintenance happen behind the scenes, freeing the IT department to focus on other needs.

Scalability

On-premise solutions are difficult to scale. When the license limit is reached, companies need to pay for another level of service that they may not need yet. Cloud solutions are easier to scale as the company grows, giving greater flexibility without large capital expenditures.

Running the numbers on a total cost of ownership for an on-premise system vs. a cloud system is a useful exercise, but a straight number comparison may not reveal the real costs of a premise system. Once factors such as continuity and lost customers are considered, cloud systems offer clear advantages over premise systems.

To find out more about Allstream’s cloud solutions, download our e-book The Case for Cloud.

Image: baranozdemir/iStock

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