By Paul Nichols
In this post, I’m going to show you a very basic example to illustrate a cloud computing cost comparison. For the purpose of this example, let’s say you are a small business owner and you need two new servers. You will also need security, storage, and backups for those servers.
You consider four options for paying for these costs:
This table illustrates the net cash flows in the first and 4th year total cash out (final year before redeploying new equipment). In each of these examples, we’ll factor in a 31% federal and state tax rate. In examples 1 and 2, we can expense the costs in section 179. As you can see, in example 2, your first year’s tax savings are actually more than your annual payments, putting $875 in your pocket. However, over the four year period, you spend over $27,000. You would spend the most amount with the Cloud, and the least amount by purchasing the equipment up front.
So buying up front and keeping the equipment in house is the way to go, right?
If you look at these numbers on the surface, cloud computing is the most expensive. But there are many other considerations that give cloud computing an edge:
Over the next couple of years, moving to the Cloud will continue to get easier and less expensive. Is your business ready to make the move?