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On-prem vs. Office365 - Exchange, SharePoint, Lync

I was posting a reply on this thread ( http://thoughtsofanidlemind.com/2013/04/29/upgrading-office-365-wave-15/ ) and decided it merited a blog post.  If you think I'm out to lunch, please comment with intelligent arguments.

The comments bring up interesting points (nearly all surrounding large-enterprise (1000k+ seats) or sub-25 user - i.e. Small Business), but the most vocal were ardently in the on-prem camp because of this math:

SuperExchangeMan = $150k/yr  Cloud = $200k/yr

Therefore, you get SuperExchangeMan and a $50k savings (read: cloud is more expensive, bottom line).  I'd like to think they are simply leaving out the fact that they must have Ironport/compliance functionality, on-prem anti-spam, etc, therefore THAT's why cloud is more expensive, but they were really harping on the above math.

So what are they missing?  On-prem licensing & soft costs.  Sure, it only costs $x salary (haha for $150k? I guess normal for Enterprise?) for SuperExchangeMan, but your per-user cost for on-prem licensing is quite expensive - hence why Office 365 popularity with SMB has taken off.  Also, the cost of hardware to run your MS infrastructure is something that should be considered as a long-term expense to deal with.

Cost comparison
Let's do some assuming for the purposes of the discussion.  Environment is ~80 users, 3-year lifecycle for MS products.  Costs are laid out as On-prem/O365 midsize.  Products covered are Exchange/SharePoint/Lync/file server (i.e. move to SkyDrive Pro).

Year1 cost is $75k/16k.
Year2 cost is $5k/16k.
Year3 cost is $5k/16k.
Year4 cost is $75k/16k.
etc

Over 3 years you'd pay $85k for on-prem, and $48k for O365 (midsize).

But think of it this way - you halve your CapEx (we're not even discussing OS licensing/hardware/environment concerns here) and potentially slash the skill-level and time requirements for IT Ops support staff.  Yes, I would be working myself out of a job, as they say, but that benefits the company, which is kind of the point.

Assuming your internet connection can deal with it and you're not trying to be super-fancy (SharePoint, specifically) with custom everything - i.e. you just need out of the box functionality - how can this NOT be a serious discussion of moving toward the cloud?  Maybe the discussion changes for enterprise...but for the SMB 25-250 user category, staying on-prem with these savings in front of you is awful hard.

Potential issues

  1. Migration headaches & additional costs - Yes, midsize means a cutover migration for Exchange.  It also might mean a migration tool to purchase.  For SharePoint it'll definitely need a migration tool.  You're eating into some of the initial 'CapEx' savings, sure, but we are looking long-term here.
  2. Support - Google tells us (haha irony) that support gets a lot better once you move into midsize/enterprise plans.  Will there be issues?  Undoubtedly.  Will they be world ending?  Unlikely.  Nearly all complaints have been around back-end issues - user experience has had little impact.
  3. Growth - If you hit midsize's 250 user cap, you have to move into an enterprise subscription - a rather large problem from what I've read.  So ideally if you're at 150-200 users already, you'd just start with an E3 subscription.
'Soft' considerations
  1. Hardware purchases and hardware lifecycling (and hardware maintenance)
  2. Hardware environmental consumption (heat, power, rackspace)
  3. IT Admins must be able to support an on-prem Exchange/SharePoint/Lync, including migrating to new versions, daily maintenance, daily support, etc.
  4. Helpdesk team must deal with Office roll-outs, ensuring users are trained/able to use new versions (you can argue this won't change), 

Conclusion
Let's be clear - migrating core infrastructure will always be a huge task.  It'll always require either brute force or expensive tools to get the job done (oversimplification...).  The move from On-prem to Office365 is not to be considered lightly, but if you're looking to save money and lower your workload going forward, it definitely warrants a good hard look.


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