The Cost of the Cloud: An IT Solution for Small Business?

The Cost of the Cloud: An IT Solution for Small Business?

If you use technology, you’ve heard of “the cloud.” It seems like the place to be, and whether or not you fully understand what it is, you may already be using it or feel like you should be. From a business perspective, there are many benefits to utilizing the cloud. In fact, it’s predicted that businesses will devote more of their budget to the cloud in 2017 — 34% up from 28% this year. As with any good decision-making process, the benefits should be weighed against the costs. It’s the latter we hope to shed a little more light on, especially where small businesses are concerned.

Let’s back up. What exactly is the cloud? Essentially, it is computing resources that are accessed via the internet. These resources can take a few different forms, such as service, storage, or software. So, instead of using on-site, local infrastructure to do work for you, in the cloud you are utilizing remote, shared resources that are available through the internet.

One common example is email. Perhaps your personal email is provided by Cox Communications (e.g., You can get to your Cox WebMail account via the internet (cloud) by logging in from any computer, anywhere.  This is a great solution for you since you don’t have any interest in setting up your own email account and server at home.

Benefits v. Costs

The example above gives us insight into the general benefit of the cloud:  access to needed resources without the investment in hardware, software, and IT support.  The question for businesses is whether the savings achieved by foregoing such investments justify the costs, financial and otherwise, of utilizing the cloud.

There are some downsides or risks involved in using the cloud, including the reliability of the internet and the possibility of security breaches.  In terms of access, if your internet service is spotty, then that will affect your ability to get to the resources you need if they are stored in the cloud. There are security risks in any IT endeavor, but using the cloud means you are relying on someone else’s defenses vs. your own.
(Perhaps that provides comfort, not angst, which is another topic). But, beyond these considerations, there are actual dollars spent to use the cloud that are, of course, part of the cost-benefit equation.

Financial Costs for Small Businesses

Costs to use the cloud are often calculated on a per-user, per-month basis. For an established small company with real data, applications and employees, the costs for cloud coverage can come to an average of $98 per employee, per month in addition to the regular IT-related costs to maintain workstations and the network.

Jumping to the cloud does not necessarily negate the need for local IT hardware. Most small businesses still need to have a server for a variety of reasons. In addition to data storage, an on-premise server performs many tasks. It manages the network log-in and user accounts; determines who has access to the network (and who doesn’t); logs access, informational and error codes for review; provides for self-contained printer queue and driver management; hosts business-specific applications and databases; and enables Virtual Private Networking (VPN) for remote employees. On-premise servers cost around $48 per employee, per month on average.

A sample three-year budget calculation for a small business in Northern Virginia with 10 employees shows that the cloud does not necessarily produce cost savings:

Equipment/Service On-Premise  Cloud
Hardware $ 6,000  
Installation $ 4,000 $ 3,000
Monthly Service    $ 480    $ 980
Total (based on 10 employees for 36 months) $ 27,280  $ 38,280

But direct costs in terms of dollars are not everything, and there are other pros and cons of cloud implementation.

Small Business Productivity

Productivity largely depends on access to needed resources. The more dispersed the staff, the more a cloud implementation may help with productivity. In the case of a regionally or locally dispersed staff,  the benefits diminish, and the cloud server implementation may just add complexity.

Access to the cloud requires an internet connection at all times. For offices that experience internet connection losses, productivity plummets. Consistent, reliable internet connectivity is achievable, but the price point for this type of circuit can be prohibitive. For those small businesses who need access to their data to continue to be productive even without internet access, a local on-premise server is likely still the best option.

Small Business Security Concerns

Security should be a major consideration for any IT solution. If a business decides to utilize the cloud without a server on the network to handle authentication and access rights, then the business has no eyes on its network. In effect, the local desktops become nothing but dumb terminals accessing everything in the cloud. As such, these terminals are not aware of who has access to what, who is connected, and what is being done. Safeguards against improper use, hackers, viruses or malware are minimal.  There are solutions to handle security in this type of configuration, but these come with additional complexity and cost.

Bottom Line

Small businesses are concerned about 1) data accessibility and retention, 2) security, 3) productivity and 4) cost — usually, in that order. Businesses see the cloud as having solutions for the first and possibly the third. But, security of the data and cost are not justifications for a cloud implementation, as yet. To eliminate the server on the network all together will adversely affect data and network security as well as performance for small businesses. Furthermore, with the cloud as an additional cost center on top of regular IT-related costs, small businesses indeed have a strong case for keeping their server rather than relying on the cloud.

This blog post was co-authored by Page Moon, CIO of Focus Data Solutions.