Private Cloud vs. On-Premises IT – An Analysis

Total Cost: On-Premise

The costs for implementing and maintaining an on-premises server and the related IT are sporadic, and sometimes hidden. They vary depending on how often you replace your servers, how heavily you utilize outside IT support, and whether or not you take a proactive approach to IT management.

Let’s start by defining the useful life of your servers. Traditional IT wisdom says you should replace your servers every 3 to 5 years. (You’re not just waiting for your servers to die, are you?) We’ll use this replacement cycle as our analysis period when we calculate the total cost of on-premises (and will do the same for a private cloud solution, to compare apples to apples).

With that window, we can now identify each cost associated with the server(s) and your firm’s greater IT infrastructure. Below is a list of individual costs you are likely to incur over the analysis period–the estimated life of your server.

On-Premise Costs: Up-Front

Costs incurred each new server cycle (once per analysis period).

  • Server(s): New Servers Every X Years (our analysis period)
  • Server Software:
    • Windows Server
    • Exchange Server
    • SQL Server
  • Server Setup Fee: IT Consultant / Managed Service Provider fee to setup your server
  • Backup System: Backup hardware and software for your firm’s servers and data
  • Microsoft Office (Retail): Retail/OEM licensing (if you purchase software outright)

I recommend that, for each of these items above, you get pricing and record it in a spreadsheet. Add up the total costs (and make sure you’re not missing anything), and you’ll have a sense of the total up-front cost of another cycle of on-premise IT.

It’s important to note that much of these costs are ultimately driven by the software your law firm uses. How many, and how powerful of servers do you need? Do you need multiple, dedicated servers? Will you need VMWare virtualization? This is ultimately determined by the software you use (namely: Practice Management and Document Management software), and the server requirements of those applications.

For instance, applications like iManage, ProLaw and Worldox are heavy-hitting apps, and require a lot of computing power. On the other hand, software like PCLaw and Tabs3 require a lot less in the way of server horsepower.

On-Premise Costs: Ongoing

Costs incurred on an ongoing basis.

  • Managed IT Services: Practice server and IT maintenance/monitoring/support
  • I Support: Reactive IT support and break-fix services
  • Email Service: Hosted Exchange / POP3 / Gmail and/or spam filtering
  • Microsoft Office: Subscription-based licensing (Office 365)

Tally up what you do, or will spend on an ongoing basis. This should include fixed monthly costs (such as a Managed IT Provider contract) as well as sporadic, less predictable costs (such as hourly IT support). For the latter, if you’re unsure of a reasonable budget for this amount, I recommend finding the average over the past two three years.

Add all of these up and determine your average monthly IT spend.

Sidebar: Plug-And-Pray Doesn’t Count

Key to this financial analysis is the assumption that when it comes to managing your law firm IT, that you’re doing it right. That is, you’re being reasonably proactive and responsible when it comes to managing IT, reducing the likelihood and impact of IT problems and keeping your client data secure.

When it comes to managing law firm IT, possibly the first, most important rule is to be proactive rather than reactive. This may be advice you’ve heard again and again—but in today’s day and age, there are still so many law firms that don’t practice this.

Avoid reactive, break-fix law firm IT management (something we call: “plug-and-pray.”)

  • Do you only call your IT consultant when something is wrong?
  • Does your IT consultant/company remotely monitor your systems, but rarely sets foot into your office?
  • Do you spend as little as possible on IT and technology?

If so: Stop it. You’re doing your employees, your clients and yourself a huge disservice. You don’t need to take a Cadillac approach to law firm IT management, but you do need to be proactive about it.

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About the Author: Dennis Dimka
Dennis Dimka is the CEO and founder of Uptime Legal Systems, North America's leading provider of technology, cloud and marketing services to law firms. Dennis is the author of Law Practice as a Service: How and Why to Move Your Law Firm to the Cloud, and was an Ernst & Young Entrepreneur of the Year finalist in 2016. Follow Dennis on LinkedIn.

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