Copyright 2014 ZeroLag www.ZeroLag.

com
ROI of Private Cloud vs. On-Premises
IT Infrastructure for Microsoft Exchange
and SharePoint
Evaluating the Relative Costs of Each Approach
Copyright 2014 ZeroLag 2 www.ZeroLag.com
ROI of Private Cloud vs. On-premises IT Infrastructure for Microsoft Exchange and SharePoint A ZeroLag White Paper
Summary of Key Findings

When deploying Microsoft Exchange and SharePoint,
organizations must decide whether employing private cloud or
on-premises IT infrastructure is the optimal choice.
Although some organizations will fnd that on-premises
implementation of Exchange and SharePoint is the preferred
solution, this approach is seldom the most cost-effective option.
Indirect costs of on-premises implementation:
Loss of focus - Diverting IT resources
from core competencies and strategic
initiatives entails opportunity costs.
Increased risk of downtime - Missed emails and
less productive staff can result in lost revenue.
Uneven support Leading private cloud providers
employ expert support technicians who work 24x7x365 to
ensure that systems operate at peak effectiveness.
Financial costs of on-premises implementation:
High initial investment - Servers, storage
space, and infrastructure required for an on-
premises implementation can be very costly.
Ongoing operating costs Includes
management, utility costs, hardware refreshes and
replacement, software assurance and upgrades,
and expenses resulting from unforeseen events
such as power outages, cyberattacks, etc.
Support staff Median annual compensation for qualifed
system administrators is approximately $100,000. [1]
ZeroLag Exchange
and SharePoint Private
Cloud Solutions
ZeroLags Private Cloud
solutions are among the most
reliable and cost-effective
available. We offer SharePoint
and Exchange implementations
for businesses of all sizes
that prefer the advantages
of a private cloud solution
over on-premises hosting.
Private cloud hosting is
more cost-effective
The high up-front and operating cost
of on-premises deployments makes
private cloud hosting the better choice
for most organizations SharePoint
and Exchange implementations.



[1] Salary.com. Systems Administrator III, Los
Angeles. Retrieved January 2, 2014. http://
salary.com
Copyright 2014 ZeroLag 3 www.ZeroLag.com
ROI of Private Cloud vs. On-premises IT Infrastructure for Microsoft Exchange and SharePoint A ZeroLag White Paper
Weighing the indirect costs of each approach
Evaluating the relative costs of private cloud and on-premises imple-
mentations of Exchange and SharePoint systems can be a complicated
task. Hidden costs, opportunity costs, and the strategic advantages of
each option must be carefully weighed in order make the right decision.
Unquantifable factors can present challenges. Many effects,
such as the impact of maintaining on-premises infrastructure
on your companys strategic focus, can be very diffcult or
impossible to accurately measure. Each aspect should, however,
be considered carefully before coming to a conclusion.
When is an on-premises implementation more cost effective?
Although an on-premises solution might seem preferable at frst, it
typically entails hidden costs that cannot be fully anticipated, along
with expenses for unforeseen events such as power outages,
natural disasters, and cyberattacks, that are diffcult to predict.
But there are some situations where an on-site solution may
prove more cost-effective and potentially more secure. If
regulatory or other requirements mandate that private data must
be maintained under the exclusive control of an organization, an
on-premises implementation may be the only choice.
Otherwise, companies that use private cloud infrastructure for
their Exchange and SharePoint systems tend to beneft from
improved strategic IT focus vs. companies that host these
systems on-premises. Mission-critical email and team col-
laboration systems are also usually more reliable and available
thanks to the specialized, around-the-clock support teams
employed by most leading private cloud providers.
It is critical that every business takes all of these factors into con-
sideration and fully examines the strategic, hidden, and opportunity
costs of each approach before making a fnal decision.
Companies that
use private cloud
infrastructure for
their Exchange and
SharePoint systems
tend to beneft
from improved
strategic IT focus
vs. companies that
host these systems
on-premises.
Copyright 2013 ZeroLag 4 www.ZeroLag.com
ROI of Private Cloud vs. On-premises IT Infrastructure for Microsoft Exchange and SharePoint A ZeroLag White Paper
Comparison of typical 200-user Exchange and SharePoint implementations
[2, 3]
On-Premises Private Cloud
Initial Cost
License Costs: $33,400
Install & Setup: $7,500
Integration: $5,000
Data Migration: $1,500
Training: $3,000
Support: $10,000
Hardware: $15,000
Infrastructure: $1,000
Total Initial Cost $87,100
Setup & Migration: $2,000
Total Initial Cost: $2,000
Operating Cost
Antivirus: $6,000
Electricity: $730
Upgrades: $500
Administration: $100,000
(1 FTE)
Total Annual
Operating Cost:
$107,230
License Costs: $1,040/mo.
Hosting Costs: $1,500/mo.
Administration: $25,000/yr.
(25% of 1 FTE)
Total Annual
Operating Cost:
$55,480
Reliability Average of 40 hours downtime per year[4] 99.99% to 99.999% uptime SLA
Maintenance
and Control
More diffcult to
maintain and operate.
Complete control and
customization.
Virtually zero maintenance;
much easier to operate than
an on-premises solution.
Level of control available
varies by provider.
The fgures shown represent estimates; actual costs will vary.
[2] ZeroLag pricing for single location solution, effective January 2014.

[3] Software Advice. Total Cost of Ownership Calculator. Retrieved
December 16, 2014. http://www.softwareadvice.com/tco/
Copyright 2014 ZeroLag 5 www.ZeroLag.com
ROI of Private Cloud vs. On-premises IT Infrastructure for Microsoft Exchange and SharePoint A ZeroLag White Paper
What are the initial and long term fnancial costs?
When determining whether an on-premises or private cloud
SharePoint and Exchange solution is best for your business, one
of the most important considerations is cost.
Generally, private cloud solutions offer a lower initial cost as well
as long-term savings. However, actual costs can vary depending
on the solution and the IT infrastructure already in place.
Companies that already have an extensive IT staff and hardware
might fnd that they can deploy SharePoint and Exchange with
only modest expense.
But for most companies, private cloud is a more cost effective
solution. Typical savings over on-premises hosting are 30% to
80%, with greater savings for companies that would otherwise
need to add signifcant infrastructure to support an on-premises
implementation. [5]
[5] ZDNet. How Much Does Exchange
Really Cost? http://www.zdnet.com/
blog/saas/how-much-does-exchange-
really-cost/609
For most companies,
private cloud is a more
cost effective solution.
Typical savings over
on-premises hosting
are 30% to 80%
Copyright 2014 ZeroLag 6 www.ZeroLag.com
ROI of Private Cloud vs. On-premises IT Infrastructure for Microsoft Exchange and SharePoint A ZeroLag White Paper
Lower Initial costs
Lower Operating Costs
Less Downtime
Increased effciency
Reduces or eliminates
upgrade costs


[6] Dell. Retrieved January 2, 2014.
http://congure.us.dell.com


[7] ZDNet. Toolkit to Calculate Data
Center Power Usage. http://www.
zdnet.com/toolkit-calculate-data-cen-
ter-server-power-usage-7000013699/


[1] Salary.com. Systems Administrator
III, Los Angeles. Retrieved January 2,
2014. http://salary.com


[5] ZDNet. How Much Does Exchange
Really Cost? http://www.zdnet.com/
blog/saas/how-much-does-exchange-
really-cost/609
Why is private cloud hosting usually more
cost effective?
There are a variety of factors that make private cloud
SharePoint and Exchange hosting more cost effective
than on-site hosting.
1. Lower initial costs
The hardware, software, physical facility, IT staff, and supporting
infrastructure needed for on-premises hosting can be very
costly. Suitable single server confgurations range in price from
$1,500 to $5,000 or more, with organizations supporting a large
number of users requiring clusters of multiple servers and more
extensive storage systems. [6]
2. Lower operating costs
Once you own the servers and software, and have your
Exchange and SharePoint systems up and working, there are
still more costs. The average server consumes more than
$700 of electricity each year. [7] On- site servers must also be
managed, updated, and maintained. The median compensation
for a Sr. System Administrator is $99,520 per year. [1]
These expenses make on-site hosting a much more costly
option compared with private cloud. For example, after switching
from on-premises hosting to a private cloud solution, Serena
Software cut its annual Exchange hosting costs from $1 million
to $250,000. [5]
Copyright 2014 ZeroLag 7 www.ZeroLag.com
ROI of Private Cloud vs. On-premises IT Infrastructure for Microsoft Exchange and SharePoint A ZeroLag White Paper
3. Less downtime
Downtime can be expensive. For businesses that rely on
Exchange email and SharePoint collaboration, this can be
especially true. If the system goes down, customer commu-
nication and employee productivity suffers.
Leading private cloud providers guarantee 99.999% uptime or
better, so reliability is never an issue.
4. Increased effciency
Another important consideration when deciding between
on-premises and private cloud SharePoint and Exchange hosting
is the effect it will have on your companys effciency. Although
this can be diffcult to quantify, there are several ways private
cloud will likely make your employees more productive.
With a private cloud implementation, IT team members will be
able to focus more on your companys core competencies and
strategic initiatives, and allocate less time and resources to infra-
structure problems. And because private cloud hosting is usually
more reliable and available than on-site hosting, staff can com-
municate and collaborate without interruption.
5. Reduces or eliminates upgrade costs
Although some companies might fnd that the monthly expense
for on-site hosting is lower than a comparable private cloud
solution, these fgures usually do not take into account the
need to upgrade and replace equipment as it fails or becomes
obsolete.
With private cloud solutions, these costs are included in the
monthly fee and clients are protected from unexpected expenses
due to premature hardware failures.
The bottom line
on private cloud
Financial advantages are
one of the most compelling
arguments in favor of private
cloud for SharePoint and
Exchange implementations.
In almost every scenario,
private cloud will beat
on-premises deployments,
both for initial and long-term
operating costs.
Copyright 2014 ZeroLag 8 www.ZeroLag.com
ROI of Private Cloud vs. On-premises IT Infrastructure for Microsoft Exchange and SharePoint A ZeroLag White Paper
How reliable will my Exchange and SharePoint
implementation be?
Reliability can make the difference between a SharePoint and
Exchange implementation that increases productivity and makes
your company money, and one that consumes unexpected time
and resources.
Although both in-house and private cloud hosting can be
extremely reliable options if implemented correctly, private cloud
usually has the advantage.
Private cloud solutions are more reliable
The average on-site server suffers 40 hours of downtime each
year; the equivalent of approximately 99.5% uptime. [4] That can
cost companies thousands of dollars in lost leads, customer sat-
isfaction, and employee productivity.
Leading private cloud providers offer service level agreements
of 99.999% (or even 100%) uptime, equating to a maximum of
5.4 minutes of downtime each year.
Downtime can be costly
The costs of missed emails, unproductive workers, and unhappy
customers can be staggering. An estimated $26.5 billion is lost
every year in North America and Europe due to IT downtime. [8]
Although each companys situation varies, using private cloud
hosting could potentially save your business a signifcant amount
as measured in missed opportunities, lost productivity, and a
tarnished reputation.
The costs of missed
emails, unproductive
workers, and unhappy
customers can
be staggering.
An estimated $26.5
billion is lost every
year in North America
and Europe due to
IT downtime.
[8]







[4] Gartner. http://gartner.com


[8] Information Week. IT Downtime Costs
$26.5 Billion In Lost Revenue. http://www.
informationweek.com/it-downtime-costs-$265-
billion-in-lost-revenue/d/d-id/1097919
Copyright 2014 ZeroLag 9 www.ZeroLag.com
ROI of Private Cloud vs. On-premises IT Infrastructure for Microsoft Exchange and SharePoint A ZeroLag White Paper
How much control is needed?
Aside from explicit fnancial considerations, companies must
also determine how their SharePoint and Exchange imple-
mentation will affect them strategically and practically. A major
reason organizations decide to go with an on-premises solution
is the control and customization that it offers.
For those companies that need extremely unique solutions, par-
ticularly customization achieved via 3rd-party add-ons, there
is little option except for on-premises hosting. But for the vast
majority, private cloud solutions can offer all the power and
control needed.
Hosted options are usually easier to control and operate than
their on-premises counterparts. For example, even non-technical
personnel can add and remove users, manage mailboxes, and
perform other tasks that previously required IT department
intervention.
Will the data be safe?
Data protection is another important factor for companies trying
to decide whether to keep their Exchange and SharePoint
system on-site or on a hosted server.
For many organizations that deal with sensitive or private
information, keeping data in-house might seem to be the better
option. However, on-premises data storage may not be as safe
as it seems, particularly if multiple layers of physical security are
not implemented.
Hosted Exchange
and SharePoint
solutions are
usually easier to
control and operate
than their on-premises
counterparts.
On-premises data
storage may not be
as safe as it seems,
particularly if proper
physical security is
not implemented.
Copyright 2014 ZeroLag 10 www.ZeroLag.com
ROI of Private Cloud vs. On-premises IT Infrastructure for Microsoft Exchange and SharePoint A ZeroLag White Paper
Likewise, on-premises solutions are often susceptible to
security risks from outdated virus protection, server and network
hardware that isnt kept up-to-date with the latest patches, and
an understaffed IT department thats too busy to closely monitor
infrastructure for security issues.
Private cloud solutions can keep your data safer
Private cloud solutions are usually much more secure than their
on-site counterparts. Because hosted SharePoint and Exchange
implementations are hosted in commercial data centers and
managed by a team of professionals well versed in security best
practices, they are usually better able to protect their clients
data than the clients are themselves.
The cloud providers professional IT staff ensures that all
critical system components are secured against intrusion and
actively monitors infrastructure to quickly detect and repel any
cyberthreats.
Copyright 2014 ZeroLag 11 www.ZeroLag.com
ROI of Private Cloud vs. On-premises IT Infrastructure for Microsoft Exchange and SharePoint A ZeroLag White Paper
Which solution is right for my business?
Private cloud solutions are a better choice for most businesses, with
lower initial and long term costs compared to on-premises hosting.
In some situations, such as for organizations that already have
extensive IT infrastructure and staff, the estimates in this guide
may not apply. In those cases, it may be more cost effective to opt
for an on-premises deployment.
Similarly, for companies that need to keep data on-site or require
advanced customization and functionality not offered by private
cloud providers, on-premises implementations of Exchange and
SharePoint may also be the only options available. These situations
are usually the exception.
Private cloud solutions are right for most companies
A 2010 survey found that 91% of IT professionals believe that cloud
computing will overtake on-premises before 2015. [9]
Only time will tell if that prediction is accurate. But the reasons
for this trend are obvious. In nearly every scenario aside from
the exceptions discussed above, private cloud offers a more
reliable, easier-to-use service at a signifcantly lower cost than an
on-premises implementation.
A 2010 survey
found that 91%
of IT professionals
believe that
cloud computing
will overtake
on-premises
before 2015.
[9]














[9] IBM. Tech Trends Survey. 2010.
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