written by David Boyajian, CFO
Something seems familiar and reminiscent of 1999. Remember when the year 2000 was approaching and everyone was changing systems for fear that everything would stop working correctly as digital and data storage systems would not be able to interpret the year ending in 00 ? At that time we were running a home brewed general ledger system written by our President & Founder Sonny Monosson ( it served us well for many years) running on a DEC PDP-11 system. Well now as Microsoft’s Window Server 2003 operating system is about to end security updates this summer for good some companies are finding themselves between a cloud and hardware place. As of July 14th, 2015 Microsoft will no longer release security updates for Windows Server 2003 forcing IT decision makers to evaluate application compatibility when migrating to a new OS such as Window Server 2012. Or they also may be considering a cloud solution including changing applications all together.
Starting with moving email and documents to a cloud solution such as Microsoft’s Office 365 and SharePoint, should be a relatively easy decision. Not only is it a cheaper solution than paying a host for email but it allows the flexibility for employees to remotely access email and documents from anywhere. It also allows for unlimited data storage which frees up immense space on the company’s internal server.
Migrating applications to a cloud environment is a more difficult decision and many things should be considered. Application compatibility in a cloud environment, security, accessibility, software licensing, and the cost to cloud verses hosting on an internal server are just a few. For one example applications such as Microsoft’s Great Plains up to version 10.0 will not run on Windows Server 2012 so if you intend to continue to host internally either you have to upgrade your Great Plains version, change applications or run your current version on an old operating system that won’t be getting anymore security updates (not recommended). There are cloud solutions.. but this means still updating your version or changing applications all together. So it’s important to investigate whether or not all of your applications will run on the new operating system and if they can be hosted in a cloud environment.
The cost of clouding can be expensive as some monthly rates are staggered based on how much data you have or how much bandwidth you use while others charge a flat rate. In an example of where the flat rate of $1,000 a month or $12,000 annually for a cloud solution compared to buying a new server for $5,000 + $2,500 for IT migrations costs and depreciating it over 3 years. You begin to see how clouding your system can be much more expensive So in three years of clouding you’ve spent $36K, significantly more than an investment in new hardware. Even with a low cost online backup solution and minimal IT support for updates etc., the in-house server solution is still a more cost effective solution for a small business. For those with existing hardware with life left on it you may want to look at the book value for cost comparison. It’s safe to say, the more complicated the software (constant updates & tweaking etc.) the more expensive to cloud. And many of us just don’t use one application so the more software programs you are running in your organization the more it will cost to cloud them. There is also usually a migration fee as well to set up and move all of your data.
For some the increased cost and ongoing monthly expense of clouding may be worth it if you can quantify better efficiency and technical results. In other words will clouding actually increase profitability? For many until the price point of clouding comes down it make sense to stick with what works.