As we explained in the article, “How Cloud Computing Can Lower Your IT Costs”, four of the main reasons that IT hosting is more cost-efficient than onsite or local IT are:
- Advanced security, DLP, and downtime prevention
- Higher operational efficiency
- Thin client and BYOD compatibility
More advantages of Cloud Computing
In today’s post, meanwhile, we’re going to be talking about how the specialization and economies of scale of hosting companies are two additional reasons that IT hosting is more cost-efficient than onsite or local IT.
As we mentioned in the previous article about IT hosting’s cost-efficiency, the multitenant architecture of the cloud allows hosting providers to host solutions for several different customers on the same physical server.
This both minimizes the hosting provider’s hardware costs (savings that the provider can then pass on to its customers) and allows the customer to pay for just the portion of the physical server that it uses, not the whole physical server.
If you host an IT solution locally, though, you’re always going to have to purchase full physical servers, even when your solution utilizes only a portion (25 percent, let’s say) of the physical server’s total resources.
Hosting companies would still be more cost-efficient than in-house IT departments at hosting IT solutions. This is due to their higher level of specialization and economies of scale. Even if you discounted the ability of hosting companies to host IT solutions for multiple customers on a single physical server.
IT hosting companies are more specialized because all of their efforts and operations are focused on IT hosting. In-house IT departments, in contrast, have to concentrate more generally on managing all aspects of their companies’ IT.
Every decision a hosting provider makes (such as the staff that it hires and the hardware and software it buys) is focused on how it can maximize the performance, security, and reliability of its hosted solutions, while minimizing its overall costs.
Economies of Scale
In most cases, IT hosting companies can get discount bulk rates on IT hosting hardware and software. This includes servers, networking equipment, operating system licenses, and virtual machine licenses. As well as on resources like Internet bandwidth and electrical power, which in-house IT departments cannot.
In addition, IT hosting companies are more efficient because they have the capability to perform the following:
- Buy the latest-and-greatest IT hosting software
- Hire experienced IT hosting specialists
- Purchase or rent large data centers that have expensive climate control systems
- Fire suppression systems
- And physical security measures (including biometric access panels, servers cages, and 24x7x365 onsite security guards)
Hosting companies can also offer affordable hosted solutions. They can do this since the costs of these assets are all shared amongst the IT hosting company’s clients.
Most businesses would never be able to afford to purchase these assets by themselves for their own in-house IT department. But with IT hosting, the client’s share of the costs of all of these assets ends up being a small amount per user. Let’s say $5-$10 per user per month. In my opinion, that’s a great deal with all the advantages and benefits that go with the subscription.