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WHITE PAPER




              Cloud vs. Cloud: Comparing the TCO
                  of Office 365 and Private Clouds
ON                                              An Osterman Research White Paper
                                                                          Published March 2012

                                                                                SPONSORED BY
          SPON




                 sponsored by
                                                                                Osterman Research, Inc.
                                              P.O. Box 1058 • Black Diamond, Washington • 98010-1058 • USA
                                Tel: +1 253 630 5839 • Fax: +1 253 458 0934 • info@ostermanresearch.com
                                                       www.ostermanresearch.com • twitter.com/mosterman
Cloud vs. Cloud: Comparing the TCO of Office 365 and Private Clouds




Executive Summary
The Microsoft stack of core communication and collaboration offerings – Exchange for email and
calendaring, SharePoint for content management and collaboration, and Lync for real time
communications and telephony – can be provided using three basic delivery models:

•   The traditional on-premise model using in-house servers, software and IT labor.

•   A public cloud model, such as Office 365, in which each service is offered for a fee per
    user per month and all backend infrastructure is multitenant and located off-premises.

•   A private cloud model, in which the servers and software are all dedicated per customer
    and located in a secure third party data center, but the infrastructure is managed remotely
    by a service provider for a fee per user per month.

GOAL OF THIS WHITE PAPER
The primary purpose of this white paper is to compare and contrast the “Cloud vs. the Cloud”
(public vs. private), as well as the traditional, on-premise approach, in terms of their Total Cost
of Ownership (TCO), and to explain why key differences exist between them. The paper will
work to dispel some of the traditional myths relating to cloud services for communications and
collaboration in general and relating to the public cloud (as represented by Office 365), and the
rapidly emerging private cloud model.

KEY TAKEAWAYS
•   While some decision makers believe that the cloud can provide cost benefits only for small
    organizations, our cost model demonstrates that enterprise-level customers will also achieve
    significant cost savings. For example, an organization of 5,000 users implementing the
    basic Microsoft stack of Exchange, SharePoint and Lync will save 19% with a private cloud
    compared to a conventional on-premise system.

•   Conventional wisdom holds that the communications and collaboration public cloud offers
    the most cost savings of any delivery model. Here, TCO calculations show the public cloud
    to be less expensive (21%) than the private cloud when comparing basic capabilities.

•   However, most medium-sized and large organizations will require a variety of enterprise-
    grade capabilities. When these additional features are factored in, the pendulum swings the
    other way and the private cloud ends up as less expensive (20%) compared to the public
    cloud. For example, adding bandwidth, storage and an upgrade to Office 365 E2 make the
    cost of Exchange in the private cloud significantly less expensive (26%) than when delivered
    via the public cloud. The cost of providing Lync voice services makes private cloud delivery
    of Lync also much less expensive (39%) than its public cloud counterpart.

•   Cloud delivery is less expensive than on-premise delivery primarily because of the reduced
    labor costs associated with the cloud. Moreover, cloud delivery provides the additional
    benefit of freeing up in-house IT staff members for other tasks that may provide more value
    to the organization.




©2012 Osterman Research, Inc.                                                                     1
Cloud vs. Cloud: Comparing the TCO of Office 365 and Private Clouds



IMPORTANT DETAILS IN THE APPENDIX OF THIS WHITE PAPER
We encourage readers of this white paper to examine the cost tables included in the Appendix
of this white paper. These tables provide the detail that supports the conclusions we offer in
this document.



Choosing the Right Delivery and Management Model
DELIVERING THE MICROSOFT UC STACK
There are three basic delivery models for providing email, collaboration and unified
communication services:

•   On-premise
    Servers and other infrastructure elements are deployed, configured and managed on the
    customer premises and managed by in-house IT staff members. This is the conventional
    model that has traditionally been used by most Exchange, SharePoint and Lync-enabled
    organizations.

•   Public cloud
    A third-party provider (such as Microsoft) manages a data center and customers rent
    services on fee-per-user/per-month basis. This model is growing in popularity and is used
    by Office 365 customers, and for many years previous to that by hosted Exchange
    customers.

•   Private cloud
    Servers and other infrastructure elements are located in a dedicated co-lo facility but are
    managed either by the hosting company or remotely by a third party managed service
    provider. This model is also growing in popularity because it offers a “hybrid” approach: the
    security and resiliency of the on-premise delivery model combined with the cost and IT
    labor savings of the cloud model.



What is the Least Expensive Approach?
THE COST DIFFERENCES BETWEEN DELIVERY AND MANAGEMENT MODELS
CAN BE SUBSTANTIAL
As shown on the following pages, the differences in the costs of providing the various solutions
in the Microsoft stack can vary substantially based on the delivery model used. For example,
the cost of a complete Exchange deployment for 5,000 users is 26% less expensive when
delivered via a private cloud compared to the public cloud, and 13% less expensive compared
to an on-premise deployment. Similarly, the cost of deploying the entire Microsoft stack of
Exchange, SharePoint and Lync – along with additional capabilities like business continuity, add-
on storage farms, additional bandwidth, etc. – is 10% less expensive when using a private
cloud compared to the public cloud, and 16% less expensive than when using on-premise
infrastructure versus a private cloud.




©2012 Osterman Research, Inc.                                                                    2
Cloud vs. Cloud: Comparing the TCO of Office 365 and Private Clouds



WHY IS THE PRIVATE CLOUD THE LEAST EXPENSIVE APPROACH?
The table below provides a comparison of the traditional, on-premise model of delivering
services with the public and private cloud approaches. In a nutshell, the private cloud model of
delivering and managing the services in the Microsoft stack is less expensive than the public
cloud because of two primary factors:

•     While public cloud providers include a variety of hardware, switching, storage, license fees
      and other features in the base price of their offerings, this base price is significantly higher
      than the fully amortized price of the hardware, software and other infrastructure elements
      offered in a private cloud deployment.

•     When deploying a full-featured enterprise-grade system, some additional features are
      typically much more expensive when deployed in a public cloud model. For example, as
      shown in the Appendix to this white paper, features like adding voice functions to Lync or
      adding extra bandwidth in an Exchange environment are much more expensive in the public
      cloud than in a private cloud scenario.


Comparison of Exchange, SharePoint and Lync TCO by Delivery Model

                             On-Premise                       Public Cloud                 Private Cloud
                    • Low amortized cost of           • No cost for hardware,        • Low amortized cost of
                      Exchange CAL + Server +           storage or deploying           Exchange licensing
                      Software Assurance                infrastructure               • Low cost for support
    Exchange
                      licensing                       • No cost for additional
    PROS
                                                        hardware, storage and
                                                        deployment
                                                      • Lowest cost for support
                    • Higher cost for additional      • Much higher costs for        • Higher cost for additional
                      hardware, storage and             additional services, e.g.,     hardware, storage and
                      deployment                        compliance, archiving,         deployment than in the
                    • Highest cost for support          Office 365 upgrade             public cloud
    Exchange
                      because of need to manage       • Additional costs (not
    CONS
                      infrastructure using only in-     shown) for hardware and
                      house personnel                   software for proxy servers
                                                        and federation services to
                                                        support cloud access




©2012 Osterman Research, Inc.                                                                                       3
Cloud vs. Cloud: Comparing the TCO of Office 365 and Private Clouds



Comparison of Exchange, SharePoint and Lync TCO by Delivery Model (concluded)

                  • Low amortized cost of            • No cost for hardware,         • Low amortized cost of
                    SharePoint CAL + Server +          storage or deploying            SharePoint licensing
 SharePoint
                    Software Assurance                 infrastructure                • Low cost for support
 PROS
                    licensing                        • Lowest cost for support

                   • Higher costs for BC/DR          • High monthly costs for        • Higher costs for BC/DR
                   • Highest costs for testing         SharePoint Online
                     add-on farm                     • Testing & Development
                   • Highest costs for                 Farms must be rolled out
                     development add-on farm           on-premise or in a private
                   • Highest costs for support         cloud.
                                                     • Additional costs (not
 SharePoint
                                                       shown) for hardware and
 CONS
                                                       software for proxy servers
                                                       and federation services to
                                                       support cloud access
                                                     • There is a large feature
                                                       gap between SharePoint
                                                       Online and SharePoint in
                                                       the Private Cloud
                   • Much less expensive &           • No cost for hardware,         • As inexpensive as the
                     more full featured than           storage or deploying            public cloud for support
                     public cloud for voice            infrastructure
 Lync
                     services                        • Lower cost than on-
 PROS
                   • Lower overall costs than in       premise for basic services
                     the public cloud for a
                     variety of ancillary services
                   • High costs for support          • High monthly costs for
                                                       Lync Online
                                                     • Even using the most
                                                       functional Lync Online
                                                       offering, there is still a
 Lync                                                  large feature gap with Lync
 CONS                                                  On-Premise or Lync in the
                                                       Private Cloud
                                                     • Hybrid Deployments are
                                                       not supported. You must
                                                       deploy Lync Online or
                                                       Lync-On Premise.



COMPARING THE COSTS BY SOLUTION AND DELIVERY MODEL
For purposes of our cost analysis, we compared the total cost of ownership for Microsoft’s three
primary enterprise offerings – Exchange, SharePoint and Lync – using on-premise, public cloud
and private cloud deployment models over a 36-month lifecycle. Our analysis focused on an
enterprise of 5,000 users. Moreover, we developed a basic or “Required” configuration – that
set of infrastructure and services required to support basic functionality for each element of the
Microsoft stack – and an enterprise grade or “Additional” set of capabilities, both of which are
presented in the charts on the following pages. The analysis and interpretation of Microsoft
licensing (for both on-premise and online) is a complex art. As evidence of this complexity the
sidebar on the next page calls out one single add-on example in the form of Exchange
archiving.


©2012 Osterman Research, Inc.                                                                                     4
Cloud vs. Cloud: Comparing the TCO of Office 365 and Private Clouds



Because of the sophisticated nature of the model
and its high level of detail, we have presented the              TCO and Differences for
calculations in an Appendix rather than present them             EXCHANGE ARCHIVING
in the body of the white paper itself. To the extent
                                                                 Even for native archiving in Exchange there
that “your mileage may vary”, it is important that the
                                                                 exists some confusing and key differences in
reader uses the conclusions of this whitepaper as                cost between Cloud and On-Premise:
directional guidance, not as hard and fast
conclusions that will apply in every circumstance.               1.   Microsoft Exchange Online Archiving, a
Developing cost models for offerings as complex as                    hosted archiving solution for on-
                                                                      premises Exchange 2010 mailboxes,
those discussed in this white paper requires some
                                                                      cannot be used with Office 365.
level of interpretation and judgment, and so some
readers may disagree with aspects of the cost model              2.   For Exchange Online (in Office 365) the
we have developed here.                                               core archiving capability is the same as
                                                                      that provided for on-premise Exchange
                                                                      at $5 per user per month.
Moreover, because Microsoft continues to evolve its
Office 365 offering, it is important to note that the            3.   The Exchange Online Plan 2 license
calculations presented in this white paper reflect the                provides advanced archiving features
state of Office 365 in the first quarter of 2012,                     like legal hold.
including the price reductions of approximately 20%
                                                                 4.   If users need more than 25Gb of
announced in mid-March 2012.                                          storage per user then the E3 license at
                                                                      $24/month is required. This will give
CLOUD vs. CLOUD -- CLEARING UP                                        users 25Gb of storage for the primary
                                                                      mailbox plus unlimited storage for
COMMON MISCONCEPTIONS                                                 Personal Archives. The E3 license is
Two key myths must be dispelled in order to move                      also required if single item recovery is
forward with helpful TCO calculations regarding                       needed for longer than 30 days.
Exchange, SharePoint and Lync. First, and contrary
                                                            5. Use of Personal Archive or retention
to the beliefs of many decision makers, the cloud is
                                                                policies requires a Microsoft Exchange
not just for small organizations. Although Microsoft            Online account or Microsoft Exchange
says that 90%+ of Office 365 deployments are with               Server 2010 account together with
companies under 50 seats, and even though only                  Microsoft Exchange Server Enterprise
about 5% of the total market today is using the                 Client Access License (CAL). This
                                                                requires Exchange Online users to have
cloud for Exchange, our findings clearly demonstrate            an enterprise CAL on top of their
that cloud-based offerings – whether public or                  standard Exchange online monthly fees.
private – are less expensive than on-premise
solutions even in large organization deployments.           6. Not all Personal Archive features are
Second, when it comes to Exchange, SharePoint and               available without either the Outlook
                                                                2010 or OWA client.
Lync TCO, not all clouds are created equal. In spite
of the power of the Microsoft and Google marketing
machines pushing their public cloud services, private cloud offerings are typically less expensive
than public cloud offerings for delivering Microsoft email, collaboration and UC solutions at the
enterprise level, as shown on the following pages.

MICROSOFT EXCHANGE
As shown in the following figure, the cost of a full private cloud deployment of Exchange is
significantly less expensive than either an on-premise (13%) or public cloud (26%) deployment.
The primary savings of the private cloud model comes from two areas:




©2012 Osterman Research, Inc.                                                                                    5
Cloud vs. Cloud: Comparing the TCO of Office 365 and Private Clouds



•   Relative to the public cloud model, private cloud savings come from the relatively low cost
    of the Exchange Client Access license ($67, or $1.86 per month over three years) compared
    to the Exchange Online price of $4.00 per month (assuming the E1 plan). Savings for the
    private cloud would be even more substantial if the public cloud model assumed the
    Exchange Online E2 plan at $8 per month or even the Office 365 E2 through E4 plans in the
    base configuration, which are priced at $14 to $22 per month.

•   Relative to the on-premise model, the private cloud is much less expensive in terms of IT
    labor cost per user. Our model assumes that while there will still be costs for help desk and
    IT support staff when using a private cloud, overall IT costs are lower for the private cloud,
    largely because little support must be provided by private cloud customers themselves.
    Moreover, in the private cloud a single operations staff member can monitor multiple
    customers at once, but in an on-premise environment, operations staff can monitor only a
    single environment.

It is also important to note that the on-premise model is subject to potentially greater cost
increases over time given that labor represents a larger proportion of overall TCO compared to
the private cloud model and public cloud models.


Microsoft Exchange Monthly Cost per User in a 5,000-User Environment




©2012 Osterman Research, Inc.                                                                    6
Cloud vs. Cloud: Comparing the TCO of Office 365 and Private Clouds



MICROSOFT SHAREPOINT
The private cloud model for managing SharePoint offers a much lower TCO compared to the
on-premise delivery model, but the private cloud is more expensive than the public cloud for
both the “required” feature set (18%) and only slightly more expensive for the required plus
additional capabilities (9%), as shown below. It is important to point out, however, that the
only functionality which pushes the private cloud model higher than SharePoint Online for the
additional capabilities is a secondary site for Disaster Recovery. Companies looking to
implement SharePoint without the extra cost of a DR site can actually do it for a 15% lower
cost in a private cloud as with Office365.

As with Exchange, the cost of the IT labor required to manage SharePoint varies widely based
on the delivery model, with on-premise clearly having the highest labor cost component. This
makes the on-premise model the most susceptible to price increases over time as labor rates
increase, and it also makes on-premise delivery highly subject to regional labor cost differences.


Microsoft SharePoint Monthly Cost per User in a 5,000-User Environment




MICROSOFT LYNC
As shown in the following figure, the cost of delivering Microsoft Lync with private cloud
delivery is slightly more expensive ($2.37/user/month or 29%) than the public cloud for the



©2012 Osterman Research, Inc.                                                                    7
Cloud vs. Cloud: Comparing the TCO of Office 365 and Private Clouds



required configuration (not including voice), but substantially less expensive ($14.79 per user
per month, or 39%) when additional features are added.

As with the other offerings in the Microsoft stack, the cost of the on-premise delivery model is
impacted significantly by IT labor costs. For public cloud delivery of Lync, IT labor represents a
smaller proportion of the TCO.

It is important to note that the largest single cost for public cloud (Office 365) delivery of Lync
among the additional enterprise grade capabilities is the provision of Lync Enterprise Voice,
Microsoft’s telephony alternative. The cost of Lync Voice is an additional $28.04 which figures
out to $16.50 per month per seat more on the client side PLUS and additional $14.02 per
month per seat on the server side as shown in the Appendix of this white paper. These costs
are compared to $3.00 per seat per month total (client + server) for private cloud and on-
premise delivery. This significant differential in cost is due to the fact that Lync Enterprise
Voice requires an upgrade to the full E4 version of Office 365 in the Online deployment PLUS
the addition of a full on-premise Lync Server, whereas the additional cost in the private cloud is
simply the amortized Plus CAL to add voice capabilities.


Microsoft Lync Monthly Cost per User in a 5,000-User Environment




©2012 Osterman Research, Inc.                                                                     8
Cloud vs. Cloud: Comparing the TCO of Office 365 and Private Clouds



TCO ACROSS THE ENTIRE MICROSOFT STACK
As shown in the following figure, the entire cost of the Microsoft stack of Exchange, SharePoint
and Lync is substantially less expensive when delivered in a private cloud than when delivered
via on-premise delivery or using a public cloud. Based on our cost model, private cloud delivery
of the complete Microsoft UC stack with all capabilities is 20% less expensive than the public
cloud and also 18% less expensive than on-premise delivery.


Cost per User of the Entire Microsoft Stack in a 5,000-User Environment




About Azaleos
Azaleos Corporation provides managed email, collaboration and unified communications
services available in private cloud, on-premise or mixed deployment architectures. Azaleos’ 24x7
managed services for Microsoft Exchange, SharePoint, Active Directory, Lync, and BlackBerry
Enterprise Server improve availability, security and performance, while reducing maintenance
time and costs.

The patented AzaleosX technology platform enables customers to maintain control over servers
and data including their location, while uptime, maintenance, and support is proactively handled
by certified experts in its network operations centers. Hundreds of companies from Fortune 500



©2012 Osterman Research, Inc.                                                                  9
Cloud vs. Cloud: Comparing the TCO of Office 365 and Private Clouds



to mid-market enterprises rely on Azaleos to manage their collaboration infrastructures and
address issues before users ever know they exist.

Azaleos is the largest provider of private cloud, on-premise and hybrid managed services in the
communications and collaboration space and the go-to option for organizations who can’t find a
fit with Microsoft or Google public cloud solutions. A member of the National Systems
Integrator program (NSI), Azaleos is one of Microsoft’s top 34 partners in the United States and
a member of both the Microsoft Exchange and SharePoint Technology Adoption Programs For
more information visit www.azaleos.com.



Appendix – Cost Model
On the following pages are the detailed costs that comprise the model developed for this white
paper. We have identified basic or “Required” elements – those infrastructure, labor and other
components that are necessary to provide the service; and enterprise grade or “Additional”
elements that can provide other types of functionality.

As noted earlier, for purposes of this cost analysis we compared the total cost of ownership for
Microsoft’s three primary enterprise offerings – Exchange, SharePoint and Lync – using on-
premise, public cloud and private could deployment models over a 36-month lifecycle in an
environment of 5,000 users.

Keep in mind that for the purposes of our calculations we chose to evaluate each application
(Exchange, SharePoint and Lync) as standalone deployments versus a combined deployment.
In some cases this calculation could lead to higher costs when 2 or 3 applications are combined
since we take away potential economies of scale in the workloads. For example by combining
hardware (i.e. storage, hardware load balancer, etc.) or by not ‘double charging’ for Exchange
unified messaging in the Lync workload section (if the customer already has Exchange
licensed), there are ways to decrease costs in the model.




©2012 Osterman Research, Inc.                                                                  10
Cloud vs. Cloud: Comparing the TCO of Office 365 and Private Clouds



Cost Comparison – Microsoft Exchange

 Required                                                On-Premise         Public Cloud    Private Cloud
 Exchange Licensing
                                                             $1.86                 -            $1.86
 (on-premise, Standard CAL and Server)
 Exchange Online Plan 1                                        -                 $4.00           -
 Windows Server License                                      $0.03               $0.00         $0.03
 MSFT Software Assurance (Standard Licensing)                $0.95                NA           $0.95
 Migration                                                   $0.03               $0.03         $0.03
 Support: Help Desk (on customer premise)                    $1.75               $1.75         $1.75
 Support: Infrastructure (vendor/service)                    $2.50             Included        $1.00
 Support: Infrastructure (vendor liaison)                      -                 $0.50           -
 Server Hardware                                             $0.25                NA           $0.25
 Switching (Network and iSCSI) Hardware                      $0.56                NA           $0.56
 Storage Hardware                                            $1.43                NA           $1.43
 Load Balancer Hardware                                      $0.44                NA           $0.44
 Deployment                                                  $0.15                NA           $0.15
 Running Total                                               $9.95              $6.28          $8.45

 Additional                                              On-Premise         Public Cloud    Private Cloud
 Exchange Licensing “Upgrade”
                                                             $0.99                 -            $0.99
 (on-premise, Enterprise CAL and Server)
 Exchange Online Plan 2 (Upgrade from P1)                      -                $4.00             -
 MSFT Software Assurance (Enterprise Licensing)              $0.59               NA             $0.59
 Extra Bandwidth                                             $0.00              $1.00           $0.00
 Exchange Client                                             $1.00              $1.00           $1.00
 Deployment                                                  $0.35               NA             $0.35
 Sub-Total                                                   $2.93              $6.00           $2.93
 Running Total                                              $12.88             $12.28          $11.38

 Additional                                              On-Premise         Public Cloud    Private Cloud
 Office 365 E3 (Upgrade from Exchange Online E2)            $0.00              $12.00           $0.00
                                                                            Included with
 Archiving (Exchange Personal Archives)                      $0.00                              $0.00
                                                                              O365 E3
 Compliance                                                  $2.50              $2.50           $2.50
  Filtering (AV/AS)                                          $1.00            Included          $1.00
 Encryption                                                  $1.00              $1.00           $1.00
 Sub-Total                                                   $4.50             $15.50           $4.50
 Running Total                                              $17.38             $27.78          $15.88

 Additional
                                                         On-Premise         Public Cloud    Private Cloud
 Business Continuity --- Disaster Recovery
 Exchange Licensing                                          $2.85                NA            $2.85
 Windows Server License                                      $0.03               $0.00          $0.03
 Migration                                                   $0.03               $0.03          $0.03
 HLB Hardware                                                $0.44               $0.00          $0.44
 Support: Infrastructure (vendor/service)                    $2.50             Included          1.00
 Server Hardware                                             $0.13                NA            $0.13
 Deployment                                                  $0.15                NA            $0.15
 Sub-Total                                                   $6.13              $0.03           $4.63
 GRAND TOTAL                                                $23.51             $27.81          $20.51




©2012 Osterman Research, Inc.                                                                           11
Cloud vs. Cloud: Comparing the TCO of Office 365 and Private Clouds



Cost Comparison – Microsoft SharePoint

 Required – Production                                   On-Premise         Public Cloud    Private Cloud
 SharePoint Licensing (Standard CAL and Server)             $2.75                 -             $2.75
 SharePoint Online Plan 1                                     -                $4.00              -
 Software Assurance (Standard)                              $1.32                NA             $1.32
 SQL Server License                                         $0.04              $0.00            $0.04
 Windows Server License                                     $0.03              $0.00            $0.03
 Migration                                                  $0.03              $0.03            $0.03
 Support: Help Desk                                         $2.17              $2.17            $2.17
 Support: Infrastructure                                    $3.65              $0.00            $1.33
 Support: Infrastructure (vendor liaison)                     -                $0.75              -
 Storage: Hardware or Additional Online Costs               $0.22              $0.01            $0.22
 Server Hardware                                            $0.17              $0.00            $0.17
 Deployment                                                 $0.03              $0.03            $0.03
 Server Cost                                                $0.17              $0.00            $0.17
 Running Total                                             $10.58              $6.99            $8.26

 Additional
                                                         On-Premise         Public Cloud    Private Cloud
 Production
 SharePoint Licensing “Upgrade” (Enterprise CAL and
                                                             $2.31                 -            $2.31
 Server)
 SharePoint Online Plan 2 (Upgrade from P1)                    -                $4.00             -
 Office Web Apps Upgrade                                       -                $6.00
 Software Assurance (Enterprise)                             $1.15               NA             $1.15
 FAST Search License                                         $0.12               NA             $0.12
 Server Hardware for FAST                                    $0.25               NA             $0.25
 Internet Access (Enterprise Server) License                 $0.23               NA             $0.23
 Extranet Partner Access License                              NA                $0.02            NA
 Sub-Total                                                   $4.06             $10.02           $4.06
 Running Total                                              $14.64             $17.01          $12.32

 Additional
                                                         On-Premise         Public Cloud    Private Cloud
 Business Continuity – Disaster Recovery
 Deployment                                                  $0.03              $0.00           $0.03
 SharePoint License (Standard and Enterprise CAL)            $5.17                -             $5.17
 SQL Server License                                          $0.04              $0.00           $0.04
 Windows Server License                                      $0.04              $0.00           $0.04
 Support: Infrastructure                                     $1.83              $0.00           $0.67
 High Availability                                           $2.95              $0.00           $1.14
 Storage Hardware                                            $0.22              $0.01           $0.22
 Server Hardware                                             $0.17              $0.00           $0.17
 Sub-Total                                                  $10.45              $0.01           $7.48
 Running Total                                              $25.09             $17.02          $19.80




©2012 Osterman Research, Inc.                                                                           12
Cloud vs. Cloud: Comparing the TCO of Office 365 and Private Clouds



Cost Comparison – Microsoft SharePoint (concluded)

 Additional
                                                         On-Premise         Public Cloud    Private Cloud
 Add-on Farm - Testing
 Deployment                                                  $0.03              $0.03           $0.03
 Support: Infrastructure                                     $1.83              $0.67           $0.67
 High Availability                                           $2.95              $1.14           $1.14
 Storage Hardware                                            $0.22              $0.22           $0.22
 Server Hardware                                             $0.17              $0.17           $0.17
 SharePoint License (Standard and Enterprise CAL)            $5.17              $5.17           $5.17
 SQL Server License                                          $0.04              $0.04           $0.04
 Windows Server License                                      $0.03              $0.03           $0.03
 Sub-Total                                                  $10.44              $7.47           $7.47
 Running Total                                              $35.53             $24.49          $27.27
Cost Comparison – Microsoft SharePoint (concluded)

 Additional
                                                         On-Premise         Public Cloud    Private Cloud
 Add-on Farm - Development
 Deployment                                                  $0.03              $0.03           $0.03
 Support: Infrastructure                                     $1.83              $0.67           $0.67
 High Availability                                           $2.95              $1.14           $1.14
 Storage Hardware                                            $0.22              $0.22           $0.22
 Server Hardware                                             $0.17              $0.17           $0.17
 SharePoint License (Standard and Enterprise CAL)            $5.17              $5.17           $5.17
 SQL Server License                                          $0.04              $0.04           $0.04
 Windows Server License                                      $0.03              $0.03           $0.03
 Sub-Total                                                  $10.44              $7.47           $7.47
 GRAND TOTAL                                                $45.97             $31.96          $34.74




©2012 Osterman Research, Inc.                                                                           13
Cloud vs. Cloud: Comparing the TCO of Office 365 and Private Clouds



Cost Comparison – Microsoft Lync

 Required                                                 On-Premise         Public Cloud    Private Cloud
 Lync Licensing (Standard and Enterprise CAL and
                                                              $3.86                              $3.86
 Server for IM/P and conferencing)
 Lync Online P2                                                 -                $5.50             -
 MSFT Software Assurance (Standard + Enterprise
                                                              $1.93                 -            $1.93
 Licensing)
 Windows Server License                                       $0.04              $0.00           $0.04
 Migration                                                    $0.03              $0.03           $0.03
 Support: Help Desk                                           $1.75              $1.75           $1.75
 Support: Infrastructure                                      5.00                 -             2.25
 Support: Infrastructure (vendor liaison)                       -                $1.00             -
 Server Hardware                                              $0.20                -             $0.20
 Load Balancer Hardware                                       $0.44                -             $0.44
 Deployment                                                   $0.15                -             $0.15
 Running Total                                               $13.40              $8.28          $10.65

 Additional                                               On-Premise         Public Cloud    Private Cloud
 Lync Licensing “Upgrade” (PLUS License)                     $3.00                               $3.00
 Office365 E4 Plan (Upgrade from Lync P2)                      -                 $16.50            --
 MSFT Software Assurance (PLUS Licensing)                    $1.47               $1.47           $1.47
 Additional Lync Server On Premise Licensing for
                                                                -                $3.86             -
 Enterprise Voice
 Additional Licensing, Hardware, Support and
                                                                -                $3.83             -
 Deployment for On-Premise Lync Server
 Extra Bandwidth                                              $1.00              $1.00           $1.00
 Lync Client                                                   NA                $0.85             -
                                                                             Included with
                                                              $2.83          Office365 E4        $2.83
 Voicemail (via Exchange UM)                                                      Plan
 Disaster Recovery                                            $1.00                 -            $1.00
 Deployment                                                   $0.35                 -            $0.35
 Headset                                                      $2.00              $2.00           $2.00
 Sub-Total                                                   $11.65             $29.51          $11.65
 Running Total                                               $25.05             $37.79          $22.30

 Additional                                               On-Premise         Public Cloud    Private Cloud
 Archiving                                                   $0.00            Not included       $0.00
 Media Gateway                                               $0.20                  -            $0.20
 SIP Trunk                                                   $0.50                  -            $0.50
 Forefront Security for Lync (malware & out of policy
                                                              $0.50              $0.50           $0.50
 content)
 Sub-Total                                                    $1.20              $0.50           $1.20
 GRAND TOTAL                                                 $26.25             $38.29          $23.50




©2012 Osterman Research, Inc.                                                                            14
Cloud vs. Cloud: Comparing the TCO of Office 365 and Private Clouds



© 2012 Osterman Research, Inc. All rights reserved.

No part of this document may be reproduced in any form by any means, nor may it be distributed without the permission of
Osterman Research, Inc., nor may it be resold or distributed by any entity other than Osterman Research, Inc., without prior
written authorization of Osterman Research, Inc.

Osterman Research, Inc. does not provide legal advice. Nothing in this document constitutes legal advice, nor shall this document
or any software product or other offering referenced herein serve as a substitute for the reader’s compliance with any laws
(including but not limited to any act, statue, regulation, rule, directive, administrative order, executive order, etc. (collectively,
“Laws”)) referenced in this document. If necessary, the reader should consult with competent legal counsel regarding any Laws
referenced herein. Osterman Research, Inc. makes no representation or warranty regarding the completeness or accuracy of the
information contained in this document.

THIS DOCUMENT IS PROVIDED “AS IS” WITHOUT WARRANTY OF ANY KIND. ALL EXPRESS OR IMPLIED REPRESENTATIONS,
CONDITIONS AND WARRANTIES, INCLUDING ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE, ARE DISCLAIMED, EXCEPT TO THE EXTENT THAT SUCH DISCLAIMERS ARE DETERMINED TO BE ILLEGAL.




©2012 Osterman Research, Inc.                                                                                                      15

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Cloud vs. Cloud: Comparing the TCO of Office 365 and Private Clouds

  • 1. WHITE PAPER Cloud vs. Cloud: Comparing the TCO of Office 365 and Private Clouds ON An Osterman Research White Paper Published March 2012 SPONSORED BY SPON sponsored by Osterman Research, Inc. P.O. Box 1058 • Black Diamond, Washington • 98010-1058 • USA Tel: +1 253 630 5839 • Fax: +1 253 458 0934 • info@ostermanresearch.com www.ostermanresearch.com • twitter.com/mosterman
  • 2. Cloud vs. Cloud: Comparing the TCO of Office 365 and Private Clouds Executive Summary The Microsoft stack of core communication and collaboration offerings – Exchange for email and calendaring, SharePoint for content management and collaboration, and Lync for real time communications and telephony – can be provided using three basic delivery models: • The traditional on-premise model using in-house servers, software and IT labor. • A public cloud model, such as Office 365, in which each service is offered for a fee per user per month and all backend infrastructure is multitenant and located off-premises. • A private cloud model, in which the servers and software are all dedicated per customer and located in a secure third party data center, but the infrastructure is managed remotely by a service provider for a fee per user per month. GOAL OF THIS WHITE PAPER The primary purpose of this white paper is to compare and contrast the “Cloud vs. the Cloud” (public vs. private), as well as the traditional, on-premise approach, in terms of their Total Cost of Ownership (TCO), and to explain why key differences exist between them. The paper will work to dispel some of the traditional myths relating to cloud services for communications and collaboration in general and relating to the public cloud (as represented by Office 365), and the rapidly emerging private cloud model. KEY TAKEAWAYS • While some decision makers believe that the cloud can provide cost benefits only for small organizations, our cost model demonstrates that enterprise-level customers will also achieve significant cost savings. For example, an organization of 5,000 users implementing the basic Microsoft stack of Exchange, SharePoint and Lync will save 19% with a private cloud compared to a conventional on-premise system. • Conventional wisdom holds that the communications and collaboration public cloud offers the most cost savings of any delivery model. Here, TCO calculations show the public cloud to be less expensive (21%) than the private cloud when comparing basic capabilities. • However, most medium-sized and large organizations will require a variety of enterprise- grade capabilities. When these additional features are factored in, the pendulum swings the other way and the private cloud ends up as less expensive (20%) compared to the public cloud. For example, adding bandwidth, storage and an upgrade to Office 365 E2 make the cost of Exchange in the private cloud significantly less expensive (26%) than when delivered via the public cloud. The cost of providing Lync voice services makes private cloud delivery of Lync also much less expensive (39%) than its public cloud counterpart. • Cloud delivery is less expensive than on-premise delivery primarily because of the reduced labor costs associated with the cloud. Moreover, cloud delivery provides the additional benefit of freeing up in-house IT staff members for other tasks that may provide more value to the organization. ©2012 Osterman Research, Inc. 1
  • 3. Cloud vs. Cloud: Comparing the TCO of Office 365 and Private Clouds IMPORTANT DETAILS IN THE APPENDIX OF THIS WHITE PAPER We encourage readers of this white paper to examine the cost tables included in the Appendix of this white paper. These tables provide the detail that supports the conclusions we offer in this document. Choosing the Right Delivery and Management Model DELIVERING THE MICROSOFT UC STACK There are three basic delivery models for providing email, collaboration and unified communication services: • On-premise Servers and other infrastructure elements are deployed, configured and managed on the customer premises and managed by in-house IT staff members. This is the conventional model that has traditionally been used by most Exchange, SharePoint and Lync-enabled organizations. • Public cloud A third-party provider (such as Microsoft) manages a data center and customers rent services on fee-per-user/per-month basis. This model is growing in popularity and is used by Office 365 customers, and for many years previous to that by hosted Exchange customers. • Private cloud Servers and other infrastructure elements are located in a dedicated co-lo facility but are managed either by the hosting company or remotely by a third party managed service provider. This model is also growing in popularity because it offers a “hybrid” approach: the security and resiliency of the on-premise delivery model combined with the cost and IT labor savings of the cloud model. What is the Least Expensive Approach? THE COST DIFFERENCES BETWEEN DELIVERY AND MANAGEMENT MODELS CAN BE SUBSTANTIAL As shown on the following pages, the differences in the costs of providing the various solutions in the Microsoft stack can vary substantially based on the delivery model used. For example, the cost of a complete Exchange deployment for 5,000 users is 26% less expensive when delivered via a private cloud compared to the public cloud, and 13% less expensive compared to an on-premise deployment. Similarly, the cost of deploying the entire Microsoft stack of Exchange, SharePoint and Lync – along with additional capabilities like business continuity, add- on storage farms, additional bandwidth, etc. – is 10% less expensive when using a private cloud compared to the public cloud, and 16% less expensive than when using on-premise infrastructure versus a private cloud. ©2012 Osterman Research, Inc. 2
  • 4. Cloud vs. Cloud: Comparing the TCO of Office 365 and Private Clouds WHY IS THE PRIVATE CLOUD THE LEAST EXPENSIVE APPROACH? The table below provides a comparison of the traditional, on-premise model of delivering services with the public and private cloud approaches. In a nutshell, the private cloud model of delivering and managing the services in the Microsoft stack is less expensive than the public cloud because of two primary factors: • While public cloud providers include a variety of hardware, switching, storage, license fees and other features in the base price of their offerings, this base price is significantly higher than the fully amortized price of the hardware, software and other infrastructure elements offered in a private cloud deployment. • When deploying a full-featured enterprise-grade system, some additional features are typically much more expensive when deployed in a public cloud model. For example, as shown in the Appendix to this white paper, features like adding voice functions to Lync or adding extra bandwidth in an Exchange environment are much more expensive in the public cloud than in a private cloud scenario. Comparison of Exchange, SharePoint and Lync TCO by Delivery Model On-Premise Public Cloud Private Cloud • Low amortized cost of • No cost for hardware, • Low amortized cost of Exchange CAL + Server + storage or deploying Exchange licensing Software Assurance infrastructure • Low cost for support Exchange licensing • No cost for additional PROS hardware, storage and deployment • Lowest cost for support • Higher cost for additional • Much higher costs for • Higher cost for additional hardware, storage and additional services, e.g., hardware, storage and deployment compliance, archiving, deployment than in the • Highest cost for support Office 365 upgrade public cloud Exchange because of need to manage • Additional costs (not CONS infrastructure using only in- shown) for hardware and house personnel software for proxy servers and federation services to support cloud access ©2012 Osterman Research, Inc. 3
  • 5. Cloud vs. Cloud: Comparing the TCO of Office 365 and Private Clouds Comparison of Exchange, SharePoint and Lync TCO by Delivery Model (concluded) • Low amortized cost of • No cost for hardware, • Low amortized cost of SharePoint CAL + Server + storage or deploying SharePoint licensing SharePoint Software Assurance infrastructure • Low cost for support PROS licensing • Lowest cost for support • Higher costs for BC/DR • High monthly costs for • Higher costs for BC/DR • Highest costs for testing SharePoint Online add-on farm • Testing & Development • Highest costs for Farms must be rolled out development add-on farm on-premise or in a private • Highest costs for support cloud. • Additional costs (not SharePoint shown) for hardware and CONS software for proxy servers and federation services to support cloud access • There is a large feature gap between SharePoint Online and SharePoint in the Private Cloud • Much less expensive & • No cost for hardware, • As inexpensive as the more full featured than storage or deploying public cloud for support public cloud for voice infrastructure Lync services • Lower cost than on- PROS • Lower overall costs than in premise for basic services the public cloud for a variety of ancillary services • High costs for support • High monthly costs for Lync Online • Even using the most functional Lync Online offering, there is still a Lync large feature gap with Lync CONS On-Premise or Lync in the Private Cloud • Hybrid Deployments are not supported. You must deploy Lync Online or Lync-On Premise. COMPARING THE COSTS BY SOLUTION AND DELIVERY MODEL For purposes of our cost analysis, we compared the total cost of ownership for Microsoft’s three primary enterprise offerings – Exchange, SharePoint and Lync – using on-premise, public cloud and private cloud deployment models over a 36-month lifecycle. Our analysis focused on an enterprise of 5,000 users. Moreover, we developed a basic or “Required” configuration – that set of infrastructure and services required to support basic functionality for each element of the Microsoft stack – and an enterprise grade or “Additional” set of capabilities, both of which are presented in the charts on the following pages. The analysis and interpretation of Microsoft licensing (for both on-premise and online) is a complex art. As evidence of this complexity the sidebar on the next page calls out one single add-on example in the form of Exchange archiving. ©2012 Osterman Research, Inc. 4
  • 6. Cloud vs. Cloud: Comparing the TCO of Office 365 and Private Clouds Because of the sophisticated nature of the model and its high level of detail, we have presented the TCO and Differences for calculations in an Appendix rather than present them EXCHANGE ARCHIVING in the body of the white paper itself. To the extent Even for native archiving in Exchange there that “your mileage may vary”, it is important that the exists some confusing and key differences in reader uses the conclusions of this whitepaper as cost between Cloud and On-Premise: directional guidance, not as hard and fast conclusions that will apply in every circumstance. 1. Microsoft Exchange Online Archiving, a Developing cost models for offerings as complex as hosted archiving solution for on- premises Exchange 2010 mailboxes, those discussed in this white paper requires some cannot be used with Office 365. level of interpretation and judgment, and so some readers may disagree with aspects of the cost model 2. For Exchange Online (in Office 365) the we have developed here. core archiving capability is the same as that provided for on-premise Exchange at $5 per user per month. Moreover, because Microsoft continues to evolve its Office 365 offering, it is important to note that the 3. The Exchange Online Plan 2 license calculations presented in this white paper reflect the provides advanced archiving features state of Office 365 in the first quarter of 2012, like legal hold. including the price reductions of approximately 20% 4. If users need more than 25Gb of announced in mid-March 2012. storage per user then the E3 license at $24/month is required. This will give CLOUD vs. CLOUD -- CLEARING UP users 25Gb of storage for the primary mailbox plus unlimited storage for COMMON MISCONCEPTIONS Personal Archives. The E3 license is Two key myths must be dispelled in order to move also required if single item recovery is forward with helpful TCO calculations regarding needed for longer than 30 days. Exchange, SharePoint and Lync. First, and contrary 5. Use of Personal Archive or retention to the beliefs of many decision makers, the cloud is policies requires a Microsoft Exchange not just for small organizations. Although Microsoft Online account or Microsoft Exchange says that 90%+ of Office 365 deployments are with Server 2010 account together with companies under 50 seats, and even though only Microsoft Exchange Server Enterprise about 5% of the total market today is using the Client Access License (CAL). This requires Exchange Online users to have cloud for Exchange, our findings clearly demonstrate an enterprise CAL on top of their that cloud-based offerings – whether public or standard Exchange online monthly fees. private – are less expensive than on-premise solutions even in large organization deployments. 6. Not all Personal Archive features are Second, when it comes to Exchange, SharePoint and available without either the Outlook 2010 or OWA client. Lync TCO, not all clouds are created equal. In spite of the power of the Microsoft and Google marketing machines pushing their public cloud services, private cloud offerings are typically less expensive than public cloud offerings for delivering Microsoft email, collaboration and UC solutions at the enterprise level, as shown on the following pages. MICROSOFT EXCHANGE As shown in the following figure, the cost of a full private cloud deployment of Exchange is significantly less expensive than either an on-premise (13%) or public cloud (26%) deployment. The primary savings of the private cloud model comes from two areas: ©2012 Osterman Research, Inc. 5
  • 7. Cloud vs. Cloud: Comparing the TCO of Office 365 and Private Clouds • Relative to the public cloud model, private cloud savings come from the relatively low cost of the Exchange Client Access license ($67, or $1.86 per month over three years) compared to the Exchange Online price of $4.00 per month (assuming the E1 plan). Savings for the private cloud would be even more substantial if the public cloud model assumed the Exchange Online E2 plan at $8 per month or even the Office 365 E2 through E4 plans in the base configuration, which are priced at $14 to $22 per month. • Relative to the on-premise model, the private cloud is much less expensive in terms of IT labor cost per user. Our model assumes that while there will still be costs for help desk and IT support staff when using a private cloud, overall IT costs are lower for the private cloud, largely because little support must be provided by private cloud customers themselves. Moreover, in the private cloud a single operations staff member can monitor multiple customers at once, but in an on-premise environment, operations staff can monitor only a single environment. It is also important to note that the on-premise model is subject to potentially greater cost increases over time given that labor represents a larger proportion of overall TCO compared to the private cloud model and public cloud models. Microsoft Exchange Monthly Cost per User in a 5,000-User Environment ©2012 Osterman Research, Inc. 6
  • 8. Cloud vs. Cloud: Comparing the TCO of Office 365 and Private Clouds MICROSOFT SHAREPOINT The private cloud model for managing SharePoint offers a much lower TCO compared to the on-premise delivery model, but the private cloud is more expensive than the public cloud for both the “required” feature set (18%) and only slightly more expensive for the required plus additional capabilities (9%), as shown below. It is important to point out, however, that the only functionality which pushes the private cloud model higher than SharePoint Online for the additional capabilities is a secondary site for Disaster Recovery. Companies looking to implement SharePoint without the extra cost of a DR site can actually do it for a 15% lower cost in a private cloud as with Office365. As with Exchange, the cost of the IT labor required to manage SharePoint varies widely based on the delivery model, with on-premise clearly having the highest labor cost component. This makes the on-premise model the most susceptible to price increases over time as labor rates increase, and it also makes on-premise delivery highly subject to regional labor cost differences. Microsoft SharePoint Monthly Cost per User in a 5,000-User Environment MICROSOFT LYNC As shown in the following figure, the cost of delivering Microsoft Lync with private cloud delivery is slightly more expensive ($2.37/user/month or 29%) than the public cloud for the ©2012 Osterman Research, Inc. 7
  • 9. Cloud vs. Cloud: Comparing the TCO of Office 365 and Private Clouds required configuration (not including voice), but substantially less expensive ($14.79 per user per month, or 39%) when additional features are added. As with the other offerings in the Microsoft stack, the cost of the on-premise delivery model is impacted significantly by IT labor costs. For public cloud delivery of Lync, IT labor represents a smaller proportion of the TCO. It is important to note that the largest single cost for public cloud (Office 365) delivery of Lync among the additional enterprise grade capabilities is the provision of Lync Enterprise Voice, Microsoft’s telephony alternative. The cost of Lync Voice is an additional $28.04 which figures out to $16.50 per month per seat more on the client side PLUS and additional $14.02 per month per seat on the server side as shown in the Appendix of this white paper. These costs are compared to $3.00 per seat per month total (client + server) for private cloud and on- premise delivery. This significant differential in cost is due to the fact that Lync Enterprise Voice requires an upgrade to the full E4 version of Office 365 in the Online deployment PLUS the addition of a full on-premise Lync Server, whereas the additional cost in the private cloud is simply the amortized Plus CAL to add voice capabilities. Microsoft Lync Monthly Cost per User in a 5,000-User Environment ©2012 Osterman Research, Inc. 8
  • 10. Cloud vs. Cloud: Comparing the TCO of Office 365 and Private Clouds TCO ACROSS THE ENTIRE MICROSOFT STACK As shown in the following figure, the entire cost of the Microsoft stack of Exchange, SharePoint and Lync is substantially less expensive when delivered in a private cloud than when delivered via on-premise delivery or using a public cloud. Based on our cost model, private cloud delivery of the complete Microsoft UC stack with all capabilities is 20% less expensive than the public cloud and also 18% less expensive than on-premise delivery. Cost per User of the Entire Microsoft Stack in a 5,000-User Environment About Azaleos Azaleos Corporation provides managed email, collaboration and unified communications services available in private cloud, on-premise or mixed deployment architectures. Azaleos’ 24x7 managed services for Microsoft Exchange, SharePoint, Active Directory, Lync, and BlackBerry Enterprise Server improve availability, security and performance, while reducing maintenance time and costs. The patented AzaleosX technology platform enables customers to maintain control over servers and data including their location, while uptime, maintenance, and support is proactively handled by certified experts in its network operations centers. Hundreds of companies from Fortune 500 ©2012 Osterman Research, Inc. 9
  • 11. Cloud vs. Cloud: Comparing the TCO of Office 365 and Private Clouds to mid-market enterprises rely on Azaleos to manage their collaboration infrastructures and address issues before users ever know they exist. Azaleos is the largest provider of private cloud, on-premise and hybrid managed services in the communications and collaboration space and the go-to option for organizations who can’t find a fit with Microsoft or Google public cloud solutions. A member of the National Systems Integrator program (NSI), Azaleos is one of Microsoft’s top 34 partners in the United States and a member of both the Microsoft Exchange and SharePoint Technology Adoption Programs For more information visit www.azaleos.com. Appendix – Cost Model On the following pages are the detailed costs that comprise the model developed for this white paper. We have identified basic or “Required” elements – those infrastructure, labor and other components that are necessary to provide the service; and enterprise grade or “Additional” elements that can provide other types of functionality. As noted earlier, for purposes of this cost analysis we compared the total cost of ownership for Microsoft’s three primary enterprise offerings – Exchange, SharePoint and Lync – using on- premise, public cloud and private could deployment models over a 36-month lifecycle in an environment of 5,000 users. Keep in mind that for the purposes of our calculations we chose to evaluate each application (Exchange, SharePoint and Lync) as standalone deployments versus a combined deployment. In some cases this calculation could lead to higher costs when 2 or 3 applications are combined since we take away potential economies of scale in the workloads. For example by combining hardware (i.e. storage, hardware load balancer, etc.) or by not ‘double charging’ for Exchange unified messaging in the Lync workload section (if the customer already has Exchange licensed), there are ways to decrease costs in the model. ©2012 Osterman Research, Inc. 10
  • 12. Cloud vs. Cloud: Comparing the TCO of Office 365 and Private Clouds Cost Comparison – Microsoft Exchange Required On-Premise Public Cloud Private Cloud Exchange Licensing $1.86 - $1.86 (on-premise, Standard CAL and Server) Exchange Online Plan 1 - $4.00 - Windows Server License $0.03 $0.00 $0.03 MSFT Software Assurance (Standard Licensing) $0.95 NA $0.95 Migration $0.03 $0.03 $0.03 Support: Help Desk (on customer premise) $1.75 $1.75 $1.75 Support: Infrastructure (vendor/service) $2.50 Included $1.00 Support: Infrastructure (vendor liaison) - $0.50 - Server Hardware $0.25 NA $0.25 Switching (Network and iSCSI) Hardware $0.56 NA $0.56 Storage Hardware $1.43 NA $1.43 Load Balancer Hardware $0.44 NA $0.44 Deployment $0.15 NA $0.15 Running Total $9.95 $6.28 $8.45 Additional On-Premise Public Cloud Private Cloud Exchange Licensing “Upgrade” $0.99 - $0.99 (on-premise, Enterprise CAL and Server) Exchange Online Plan 2 (Upgrade from P1) - $4.00 - MSFT Software Assurance (Enterprise Licensing) $0.59 NA $0.59 Extra Bandwidth $0.00 $1.00 $0.00 Exchange Client $1.00 $1.00 $1.00 Deployment $0.35 NA $0.35 Sub-Total $2.93 $6.00 $2.93 Running Total $12.88 $12.28 $11.38 Additional On-Premise Public Cloud Private Cloud Office 365 E3 (Upgrade from Exchange Online E2) $0.00 $12.00 $0.00 Included with Archiving (Exchange Personal Archives) $0.00 $0.00 O365 E3 Compliance $2.50 $2.50 $2.50 Filtering (AV/AS) $1.00 Included $1.00 Encryption $1.00 $1.00 $1.00 Sub-Total $4.50 $15.50 $4.50 Running Total $17.38 $27.78 $15.88 Additional On-Premise Public Cloud Private Cloud Business Continuity --- Disaster Recovery Exchange Licensing $2.85 NA $2.85 Windows Server License $0.03 $0.00 $0.03 Migration $0.03 $0.03 $0.03 HLB Hardware $0.44 $0.00 $0.44 Support: Infrastructure (vendor/service) $2.50 Included 1.00 Server Hardware $0.13 NA $0.13 Deployment $0.15 NA $0.15 Sub-Total $6.13 $0.03 $4.63 GRAND TOTAL $23.51 $27.81 $20.51 ©2012 Osterman Research, Inc. 11
  • 13. Cloud vs. Cloud: Comparing the TCO of Office 365 and Private Clouds Cost Comparison – Microsoft SharePoint Required – Production On-Premise Public Cloud Private Cloud SharePoint Licensing (Standard CAL and Server) $2.75 - $2.75 SharePoint Online Plan 1 - $4.00 - Software Assurance (Standard) $1.32 NA $1.32 SQL Server License $0.04 $0.00 $0.04 Windows Server License $0.03 $0.00 $0.03 Migration $0.03 $0.03 $0.03 Support: Help Desk $2.17 $2.17 $2.17 Support: Infrastructure $3.65 $0.00 $1.33 Support: Infrastructure (vendor liaison) - $0.75 - Storage: Hardware or Additional Online Costs $0.22 $0.01 $0.22 Server Hardware $0.17 $0.00 $0.17 Deployment $0.03 $0.03 $0.03 Server Cost $0.17 $0.00 $0.17 Running Total $10.58 $6.99 $8.26 Additional On-Premise Public Cloud Private Cloud Production SharePoint Licensing “Upgrade” (Enterprise CAL and $2.31 - $2.31 Server) SharePoint Online Plan 2 (Upgrade from P1) - $4.00 - Office Web Apps Upgrade - $6.00 Software Assurance (Enterprise) $1.15 NA $1.15 FAST Search License $0.12 NA $0.12 Server Hardware for FAST $0.25 NA $0.25 Internet Access (Enterprise Server) License $0.23 NA $0.23 Extranet Partner Access License NA $0.02 NA Sub-Total $4.06 $10.02 $4.06 Running Total $14.64 $17.01 $12.32 Additional On-Premise Public Cloud Private Cloud Business Continuity – Disaster Recovery Deployment $0.03 $0.00 $0.03 SharePoint License (Standard and Enterprise CAL) $5.17 - $5.17 SQL Server License $0.04 $0.00 $0.04 Windows Server License $0.04 $0.00 $0.04 Support: Infrastructure $1.83 $0.00 $0.67 High Availability $2.95 $0.00 $1.14 Storage Hardware $0.22 $0.01 $0.22 Server Hardware $0.17 $0.00 $0.17 Sub-Total $10.45 $0.01 $7.48 Running Total $25.09 $17.02 $19.80 ©2012 Osterman Research, Inc. 12
  • 14. Cloud vs. Cloud: Comparing the TCO of Office 365 and Private Clouds Cost Comparison – Microsoft SharePoint (concluded) Additional On-Premise Public Cloud Private Cloud Add-on Farm - Testing Deployment $0.03 $0.03 $0.03 Support: Infrastructure $1.83 $0.67 $0.67 High Availability $2.95 $1.14 $1.14 Storage Hardware $0.22 $0.22 $0.22 Server Hardware $0.17 $0.17 $0.17 SharePoint License (Standard and Enterprise CAL) $5.17 $5.17 $5.17 SQL Server License $0.04 $0.04 $0.04 Windows Server License $0.03 $0.03 $0.03 Sub-Total $10.44 $7.47 $7.47 Running Total $35.53 $24.49 $27.27 Cost Comparison – Microsoft SharePoint (concluded) Additional On-Premise Public Cloud Private Cloud Add-on Farm - Development Deployment $0.03 $0.03 $0.03 Support: Infrastructure $1.83 $0.67 $0.67 High Availability $2.95 $1.14 $1.14 Storage Hardware $0.22 $0.22 $0.22 Server Hardware $0.17 $0.17 $0.17 SharePoint License (Standard and Enterprise CAL) $5.17 $5.17 $5.17 SQL Server License $0.04 $0.04 $0.04 Windows Server License $0.03 $0.03 $0.03 Sub-Total $10.44 $7.47 $7.47 GRAND TOTAL $45.97 $31.96 $34.74 ©2012 Osterman Research, Inc. 13
  • 15. Cloud vs. Cloud: Comparing the TCO of Office 365 and Private Clouds Cost Comparison – Microsoft Lync Required On-Premise Public Cloud Private Cloud Lync Licensing (Standard and Enterprise CAL and $3.86 $3.86 Server for IM/P and conferencing) Lync Online P2 - $5.50 - MSFT Software Assurance (Standard + Enterprise $1.93 - $1.93 Licensing) Windows Server License $0.04 $0.00 $0.04 Migration $0.03 $0.03 $0.03 Support: Help Desk $1.75 $1.75 $1.75 Support: Infrastructure 5.00 - 2.25 Support: Infrastructure (vendor liaison) - $1.00 - Server Hardware $0.20 - $0.20 Load Balancer Hardware $0.44 - $0.44 Deployment $0.15 - $0.15 Running Total $13.40 $8.28 $10.65 Additional On-Premise Public Cloud Private Cloud Lync Licensing “Upgrade” (PLUS License) $3.00 $3.00 Office365 E4 Plan (Upgrade from Lync P2) - $16.50 -- MSFT Software Assurance (PLUS Licensing) $1.47 $1.47 $1.47 Additional Lync Server On Premise Licensing for - $3.86 - Enterprise Voice Additional Licensing, Hardware, Support and - $3.83 - Deployment for On-Premise Lync Server Extra Bandwidth $1.00 $1.00 $1.00 Lync Client NA $0.85 - Included with $2.83 Office365 E4 $2.83 Voicemail (via Exchange UM) Plan Disaster Recovery $1.00 - $1.00 Deployment $0.35 - $0.35 Headset $2.00 $2.00 $2.00 Sub-Total $11.65 $29.51 $11.65 Running Total $25.05 $37.79 $22.30 Additional On-Premise Public Cloud Private Cloud Archiving $0.00 Not included $0.00 Media Gateway $0.20 - $0.20 SIP Trunk $0.50 - $0.50 Forefront Security for Lync (malware & out of policy $0.50 $0.50 $0.50 content) Sub-Total $1.20 $0.50 $1.20 GRAND TOTAL $26.25 $38.29 $23.50 ©2012 Osterman Research, Inc. 14
  • 16. Cloud vs. Cloud: Comparing the TCO of Office 365 and Private Clouds © 2012 Osterman Research, Inc. All rights reserved. No part of this document may be reproduced in any form by any means, nor may it be distributed without the permission of Osterman Research, Inc., nor may it be resold or distributed by any entity other than Osterman Research, Inc., without prior written authorization of Osterman Research, Inc. Osterman Research, Inc. does not provide legal advice. Nothing in this document constitutes legal advice, nor shall this document or any software product or other offering referenced herein serve as a substitute for the reader’s compliance with any laws (including but not limited to any act, statue, regulation, rule, directive, administrative order, executive order, etc. (collectively, “Laws”)) referenced in this document. If necessary, the reader should consult with competent legal counsel regarding any Laws referenced herein. Osterman Research, Inc. makes no representation or warranty regarding the completeness or accuracy of the information contained in this document. THIS DOCUMENT IS PROVIDED “AS IS” WITHOUT WARRANTY OF ANY KIND. ALL EXPRESS OR IMPLIED REPRESENTATIONS, CONDITIONS AND WARRANTIES, INCLUDING ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, ARE DISCLAIMED, EXCEPT TO THE EXTENT THAT SUCH DISCLAIMERS ARE DETERMINED TO BE ILLEGAL. ©2012 Osterman Research, Inc. 15