N‑central: Calculating TCO and ROI in the On-Premise to Cloud Transition

A few weeks ago, I received a message over Teams from Laura White, one of our Partner Success Managers who works with many of our Super Elite partners. Laura was preparing for an important meeting with a partner to discuss migrating from an On-Premise N‑central server to a Cloud Hosted N‑central with N‑able, and she wanted my input.

The move from on-premise infrastructure to the cloud has been a hot topic. And for good reason: it promises enhanced flexibility, scalability, and accessibility. But what about the nitty-gritty details of actually making the switch?

In a previous blog, 10 Reasons to Migrate to a Hosted N‑central Server, I discussed the advantages of moving to the cloud. However, a key promise in that blog was to provide a Total Cost of Ownership (TCO) and Return on Investment (ROI) comparison. Today, I’ll fulfill that promise by presenting the numbers and guiding you through the financial implications of transitioning from an on-premise setup to a hosted N‑central server.

Please note: The figures used in this example are mock examples. Partners should always use their own calculations based on their specific circumstances and data to make informed decisions.

Calculating Total Costs

To calculate the cost of your on-premise N‑central server, consider the following:

1. Hardware Costs: $40,000
2. Annual Software Licenses: $120,000
3. Annual Maintenance: $15,000
4. IT Personnel Salaries: $40,000 per year
5. Initial Setup Costs and Onboarding: $10,000

Total On-Premise Costs for One Year: $225,000

For a hosted N‑central server, the costs are different:

1. Annual Software Licenses: $120,000
2. Annual Hosting Fees: $12,000
3. Initial Setup Costs and Onboarding: $5,000
4. Reduced IT Personnel Salaries: $20,000
5. Reduced Annual Maintenance: $5,000

Total Hosted Solution Costs for One Year: $162,000

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Calculating Total Benefits

Now, let’s look at the total benefits of a hosted N‑central server. Benefits can be both tangible and intangible, contributing to cost savings and improved operations. For simplicity, we’ll focus on key quantifiable benefits:

1. Time Savings: Faster deployment and scalability, estimated to save 20 hours per week for IT personnel.
   • 20 hours/week x 52 weeks x $20/hour = $20,800 per year
2. Operational Efficiency Gains: Improved efficiency, estimated to bring additional cost savings.
   • Estimated $15,000 per year

Please note: There could be additional Net Benefits that could be included based on the blog I referenced above.

Calculating Return on Investment (ROI)

Finally, we calculate the ROI by comparing the costs and benefits of both solutions.

Net Benefit Calculation

Net Benefit = (Time Savings + Operational Efficiency Gains) – Additional Costs

Net Benefit = ($20,800 + $15,000) – ($225,000 – $162,000)

Net Benefit = -$27,200

ROI Calculation

ROI = (Net Benefit / Total On-Premise Costs) × 100

ROI = (-$27,200 / $225,000) × 100

ROI ≈ -12.09%

Summary

Switching to a hosted N‑central server could save you $27,200 over one year, resulting in a 12.09% return on investment (ROI). This total includes the initial hardware costs, software licenses, maintenance, IT personnel salaries, and initial setup and onboarding costs.

By carefully considering these factors, you can make a more informed decision and present a compelling case for migrating to a hosted solution.

Jason Murphy is the Head Nerd for N‑central and Efficiency at N‑able. You can follow him on reddit on r/nable or LinkedIn at ncentral_nerd.