In today’s rapidly evolving IT landscape, businesses face a pivotal decision: whether to host their infrastructure in the cloud or maintain it on-premises. Cloud-hosted solutions offer scalability, flexibility, and reduced upfront costs, while on-premises setups promise control, security, and long-term cost predictability. Both models have their merits, and the choice often hinges on an organisation’s size, regulatory environment, and operational priorities.
However, the lines between these two models are becoming increasingly blurred. Software vendors and service providers are aggressively shifting toward subscription-based pricing—even for traditionally on-premises products. This trend complicates cost comparisons, as on-premises deployments now often include recurring licensing fees, support contracts, and hybrid cloud integrations. What was once a straightforward capital expenditure versus operational expenditure debate now demands a deeper analysis of total cost of ownership, vendor lock-in, and long-term scalability.
With all this in mind, it’s no surprise that PIP is asked daily—by both existing and prospective clients—which solution is best for their business: cloud-hosted or on-premises? And the honest answer, more often than not, is: it depends. PIP maintains a neutral stance in this decision-making process. We’ve been delivering onsite IT support for over 30 years, and we continue to do so. At the same time, we operate our own private cloud and data centre, and as a certified Microsoft Partner, we offer the full Microsoft ecosystem through Microsoft 365 and Azure.
Historically, we’ve often recommended on-premises solutions to clients with a single office who were looking for a simple, cost-effective setup without unnecessary complexity. These setups were straightforward, predictable, and suited to businesses that didn’t require advanced scalability or remote access capabilities.
However, the landscape has shifted dramatically in recent years. Inflationary pressures, the hybridisation of software platforms—especially from vendors like Microsoft—and the growing demand for robust cybersecurity have all contributed to a change in our recommendations. Today, we find ourselves suggesting cloud services for the majority of our clients. And frankly, we’re often surprised to see that cloud pricing can be comparable to—or even more affordable than—traditional on-premises setups.
Below, we’ll outline the typical costs associated with both cloud computing and on-premises infrastructure for a new start-up. These figures are intended as a guide—you can adjust them to suit your business model and the stage your business is currently in.
I have used a new generic office for the below figures, with an initial staff of 10 users. The server may well be overkill, but typically many servers these days perform multiple roles through virtualization, typically running as a DC and Files server and then adding on other servers and services such as Microsoft SQL server for the clients core databases and/or Microsoft Terminal Services for home access.
What are the Costs for an On Premise Setup ?
| On-premise Capital Expenditure Hardware, Software and Labour | Cost |
|---|---|
| HP ML350 G11 Server Dual Xenon Processor 32GB RAM 4 x 1TB SSDs | $15,000 |
| Windows 2025 Server | $1,800 |
| Backup Software | $550 |
| Backup NAS for local backups | $1,500 |
| 10 x HP Desktop Computers + Monitors @ $1800 Each | $18,000 |
| Setup, Configuration and Rollout of PCs and Network | $4,400 |
| Routers, Switches, Printers & Scanners we will not include as these will need to be included on either on-premises or cloud solution. | |
| Total Capital Outlay for On-Premises IT infrastructure | $41,250 |
| Total Cost extrapolated to a 36 month life as this is the warranty on all PCs and Servers, of course interested should be added but has no been. | $1145 / month |
| Monthly On-premise Subscription Fees | Cost |
|---|---|
| Monthly Cloud Backup Storage | $330 |
| 10 x Monthly Microsoft 365 Business Premium (I choose premium due to all the security addons now expected ) | $366 |
| Total Monthly Subscription Fees | $916 / month |
Based on this basic setup, we have an extrapolated on-premises total monthly cost of $1861. This does not take into account either any interest on the lease or lost interest on the invested capitol.
I choose Microsoft 365 Premium, as it includes all the Virus and the Advanced Cyber Security protection that must now be deployed within every business for Australian business Cyber Security Legislation . The alternative to this would be taking on a managed service agreement that would typically include these tools. However if we where to add an IT Managed Service, this would have a monthly cost of between $50 – $150 / device so a further 500- $1500 per month.
Of course depending on the needs/load we could find a cheaper servers, but even a $10K server would only reduce the monthly fee by $138.
What are the Costs for Hosted Cloud Computing?
| Hosted Cloud Capital Expenditure Hardware, Software and Labour | Cost |
|---|---|
| 10 x Intel Windows Remote Desktop Terminals + 26 inch Monitors | $6,600 |
| Setup, Configuration and Rollout of PCs and Network | $550 |
| Routers, Switches, Printers & Scanners we will not include as these will need to be included on either on-premises or cloud solution. | |
| Total Capital Outlay for Cloud T infrastructure | $7150 |
| Total Cost extrapolated to a 36 month life as this is the warranty on all PCs and Servers, of course interested should be added but has no been. | $199 / month |
| Monthly Cloud Subscription Fees | Cost |
|---|---|
| 10 x PIP Standard Cloud fee includes all licenses, Microsoft Office, Servers, Services, Management and Backups | $1500 |
| Total Cloud Monthly Subscription Fees | $1500 |
Here I have utilised the sleek, large screen, modern thin terminals for all users. Now of course there may be the requirement for one of the users to need stand alone PC to use locally if there is any CAD or Graphics work within your business. But this wasn’t accounted for in the on-premise quote either.
We may suggest 2 x Internet connections with a hosted service of this size, so we need to add $70-80 for PIP Local Only Broadband on for this.
But no matter how you ruin the numbers, we now have a completely managed, extremely secure, housed in a purpose built Australian ISO 27001 approved Datacentre, Enterprise solution for less than you can set it up in house.
The result for 10 Users is an on-premises total monthly cost at $1,861 and a fully managed Cloud Solution for $1,699 per month.
On-premises Vs Cloud Cost Comparison Chart
The following chart is a quick summary of all the collated information above. All capital expenses listed below have been converted to a monthly figure over a period of 36 months. 36 Months is the standard lifecycle of most IT equipment and software and PIP provides hardware warranties for all your devices for this period.
| Hardware/Licenses/Labour | On-premises | Cloud Computing |
|---|---|---|
| HP ML350 G11 Server Dual Xenon Processor 32GB RAM 4 x 1TB SSDs | $416 | $0 |
| Windows 2025 Server | $50 | $0 |
| Workstations with Monitors | $500 | $183 |
| Backup Software | $15.27 | $0 |
| Backup NAS for local Backups | $41.67 | $0 |
| Setup, Configuration and Rollout of PCs and Network | $122.23 | $0 |
| Monthly Cloud Backup Storage | $330 | $0 |
| Microsoft 365 Business Premium | $36.19 | $0 |
| PIP Cloud License Fee | $0 | $1500 |
| Support or IT Managed Services | $600 | $0 |
| Total Monthly Cost | $2111.36 | $1683 |
So What Is Better OnPremsie or Cloud Computing ?
Well, that still depends. Cloud computing is great for accessing ones data everywhere, but still needs a good quality Internet connection. With some clients we need to install A fibre based Ethernet connection, which quickly adds a further $400 / month cost.
So, while the choice between cloud-hosted and on-premises infrastructure still isn’t black and white, one increasingly concerning reality is clear: today, businesses can access a professional, enterprise-grade IT solution—hosted in a leading Australian data centre—for the same cost, or even less, than managing the system themselves.
This shift brings a host of advantages. No more large power bills, no more worrying about power outages, theft, overheating hardware or Cyber breaches. And that’s before we even begin to consider the ongoing burden of IT maintenance—patching, monitoring, backups, and hardware replacements—all of which are either automated or included in cloud service plans.
For many businesses, especially start-ups and SMEs, this means they can now access infrastructure that was once reserved for large enterprises, without the overhead or complexity. It’s a game-changer—and one that’s reshaping how we think about IT investment and operational efficiency.
