Total Cost Of Ownership: Hosting Versus Server Ownership

The websites as we see them, are warehouses of a gigabytes of digital information and you need specialized hardware and software to have yours up and running. You can do that yourself by buying a dedicated server and managing the technical nuances on your own or simply let a web hosting provider take care of this for you in exchange for a fee.

Either way, costs are going to be involved. That being said, you would be surprised just how much you can save by hosting your site with a web hosting company.

Don’t believe us? Here is comparing the total cost of ownership (TCO) of the two.

What is Total Cost of Ownership?

The Total Cost of Ownership or TCO is simply an estimate of the direct and indirect cost of the resources that would be involved in acquiring an asset and keeping it operational during its lifecycle.

By clearly capturing the difference between purchase price and long-term costs, TCO analysis can help in making critical business decisions like buying an equipment vs leasing it.

Now that we have a good understanding of what TCO is about, let’s take a look at its relevance in helping you choose between buying a dedicated server for your website or outsourcing web hosting services.

TCO of owning a server:

Purchasing your own server is great if you have a high traffic website and do not want its performance to be affected by external factors related to other websites. Having a server dedicated solely to your website gives you complete freedom to use your resources the way you see fit. You get to decide the hardware required, can select the operating system you like and plan your storage size as well.
But, as we know, authority comes at a cost. Server ownership is no exception.

To calculate the TCO of owning a sever, simply list the direct, indirect and operations cost associated with your potential purchase.

While direct costs cover the money involved upfront, indirect costs comprise resources associated with initial installation, personnel training, maintenance and technical support, upgrade and downtime.
Operational costs include costs associated with security in case of breaches or damages, utility expenses like electricity, infrastructure, insurance and personnel salaries to name a few.

The TCO of owning a server can be grouped into the following broader buckets:

Hardware costs: A server’s hardware determines the tasks it is meant for. While you don’t need high-end servers for small jobs like printing or network file sharing, web intensive tasks, including running your website require prime quality servers with multiple fast processors, light operating system, and at least 16 GB of RAM. You need to pay for the hardware upfront. Depending on your business needs, this can cost you somewhere between $400 – $1000.

Cost of Server OS and Apps: Your purchased server might or might not come with a pre-installed software. If the latter describes your situation, you will have to select your server OS that best fit your needs and pay for it, of course. High-end sever operating systems like Windows’ can cost you somewhere between $1000-4000. A relatively inexpensive alternative to this is the Mac server priced about $500. Linux server distributions range from free to $1000 or more for an annual support subscription.

Once you’ve bought the server and decided the operating system, you will need to purchase software to use your server to perform the desired tasks. You can incur humongous costs here. Depending on your needs, any amount between $500-$5000 is safe to assume.

Operational costs: If you think that the hardware and software costs have burned a hole in your pocket, it might come to you as a shock that they represent only 15-25% of the TCO. You still need to cover the maintenance, upgrade and support costs. These include initial configuration, ongoing support fees, payment to the workforce, upgrade fee, license renewal, and insurance premium. These might cost you somewhere between $5000 – $10000.

Not that we’ve seen the lofty expenses associated with owning a server, let’s look at a cheaper, and much more convenient alternative – hosting

Why is Hosting a Good Idea?

Most small businesses do not have the resources to own and maintain a server. In fact, even most big businesses do not want to be bothered by technical scheme of things like owning and maintaining a server so that they can give undivided attention to their core work. Such businesses purchase the services of a hosting company and offload their headache. Let’s understand why it is a smart decision.

If you decide to go ahead with hosting, you need not be concerned about hassles of purchasing hardware and software, storage space or any of the management costs. Your provider will take care of it for you – that’s his full-time job.

They also ensure minimal downtime by providing 98% to 99.9% availability which means your downtime lasts for any time between 45 minutes to 14 hours per month as against your personal server where an outage can haunt your IT team for days at a stretch. The would spend hours figuring out what went wrong and days solving the issue.

98% of organizations say that a single hour of downtime costs them thousands of dollars. It’s not just about the lost revenue here. Downtime also puts your company’s reputation at stake. A customer who is in urgent need of your service can easily find your replacement and might not come back to you later.

If you deploy your own server, you will need to have trained workforce to maintain it. And, it’s highly unlikely that one employee will be able to manage it all on her own. Hosting saves you this enormous cost as well.

How Do You Decide Your Budget?

Search for online calculators that can help you determine the TCO of a server. Simply let it know your needs and it will calculate the TCO for you. 

Let’s say you want to buy a server.

The first-year cost of owning a server is about $40000 while that of hosting is about $4000. For the next four years, server ownership costs you around $10000 while hosting costs still remain pegged at $4000 if there’s no inflation.

With a server, in the first year, you will incur installation, configuration and maintenance costs. No such costs burden you if you decide to pick hosting. This way you get to save HVAC (Heating, Ventilation and Air Conditioning), power and other infrastructure costs. You don’t have to pay the IT personnel as well.

Compare that with hosting to know the benefits.

  • You don’t have to pay for maintenance
  • The set up is already there, and you just need to put up your site
  • Your website also gets world class infrastructure, professional support, reduced downtime and better security.
  • Regular backups without a worry
  • Can allocate resources to your website as needed
  • Can change server plans depending on your needs
  • Extremely cost effective

Take a look at our web hosting plans and decide for yourself!

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