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The Real Cost of Physical IT Infrastructure

IT department has received a budget to purchase new servers. But there is a difference between how much IT costs and how much it really costs.

In the today’s virtual era companies still stick to buying physical servers to operate their company IT systems. We will not be discussing their reasons but we rather want to focus on the ultimate concern of anyone – the money. Your IT people may have received a budget to buy servers and now they look forward for the opportunity to buy something really cool. But at the end everyone is disappointed. Why? Because there is a difference between what IT costs to buy and its actual costs.

Let us have a look at the total costs of ownership of two servers. Leaving aside certain aspects that complicate and denigrate the calculation (for example the mean time between failures and the value of money in time). We will assume that you are planning to purchase your IT infrastructure for 5 years.

Primary investment

As early as at this stage you will get disappointed for the first time. Apart from the servers, you need to buy additional hardware necessary for reasonable operation of the physical infrastructure. This means you will buy two servers with the following configurations

  • 2x CPU (12 cores ), 4x 32 GB RAM, 8x 1.92 TB SSD
  • 2x CPU (20 cores), 4x 32 GB RAM, 6x 3.84 TB SSD

plus a UPS battery system. It should be noted here that the average service life of UPS is less than 5 years assumed in this example and therefore this item shall be included twice in the budget. Many companies decide to skip this part but we are going to keep it because in our example we anticipate that your company acts responsibly.

You have definitely noticed that cooling is not included in the calculation. If you are planning to have two servers in one office no special cooling is necessary, except a standard air conditioning unit or an open window. You are not going to pay for a rack with cabling and connectivity infrastructure. You already have your Internet connection in the office and you will very likely find a place in a switch on the servers. Those costs are included in the table below just to give you an idea but they will not be used in our calculation.

Server 1 CZK 184 673
Server 2 CZK 235 877
UPS CZK 40 000
Cooling CZK 40 000
Rack with cabling CZK 10 000
Infrastructure - connectivity CZK 50 000
TOTAL FOR THE INVESTMENT CZK 500 550

To this total price you need to add costs of transportation, assembly and installation.

Operating costs

Now that we have spent time and efforts to get all the necessary equipment, we are expecting 5 years of trouble-free operation… well, not really. Many companies may not be even aware of all operating costs consumed by their physical infrastructure.

Obviously, your invoices will include electricity to operate the servers, cooling and battery UPS.

Power Supply - server CZK 191 318
Power supply - UPS CZK 85 410
Power supply - cooling CZK 76 584
Total CZK 353 312

In addition to those items, we need to consider costs of regular servicing and maintenance of the individual pieces of equipment, including unplanned servicing, repairs, updating and revisions. If we remain very optimistic the costs will be as follows:

Servers CZK 634 304
Cooling - checks CZK 12 500
TOTAL OPERATING COSTS CZK 1 000 116

Service life

The thing will get more complicated because we need to consider the service life. The amounts we have talked about by now apply for the 5 years during which the equipment should last. But what about after the five years? Yes, you will need to do the whole thing again. The technologies, the equipment, the manufacturers - everything will have changed - which means you will not simply repeat the order.

A figure missing on the invoice

In the calculation we need to take into account one more figure that is hard to find in financial records. It is efficiency of use of capacity of the individual servers. If you are using the server as it is then you have to deal with the fact that you only utilize 15 % of the total capacity of your giant investment. If your IT people use virtualization then the share will increase to 50 %. Which means that you will pay 50 - 85 % more than you would actually need.

The bottom line

TOTAL COSTS FOR 5 YEARS CZK 1 500 666

This has been a real life example of a situation so we can look at these specific conditions and how the result would come out with choosing a cloud solution.

CLOUD COSTS FOR 5 YEARS CZK 1 500 000

In this case we arrive at the ratio of 1:1. But think about the additional benefits that this one number does not show. When operating the infrastructure in cloud, all other responsibilities related to the care about physical components are gone. At the same time, it is very easy to change the size of your infrastructure. When you purchase physical servers and underestimate their site, you are facing much more higher investments. So what do you say, would it not be better to take the budget set aside for the purchase of physical infrastructure and change this investment into the operating costs of a cloud?

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