When the time comes to upgrade company’s hardware or software licenses, we are frequently asked by our clients to help them decide whether to buy, lease or ”go to cloud”. Each case is different because individual company needs are vastly different.
We sit down with clients to carefully analyze their situation and present them with various financial scenarios taking into account the associated risks and benefits. And in some cases, if something sounds too good to be true, it almost always is.
Here is an example (omitting the details) from an analysis that we recently performed for one of our clients. They had an urgent need to refresh both their Microsoft Office Suite and Microsoft Exchange Server, but they had difficulty determining the right option, as it can get complicated. They reached out to us, hence the analysis. We presented them with 4 pricing models that was based on 100 users taking into account:
• list prices for easier comparison and no hardware cost included
• various add-ons as required
• included professional services for the initial implementation.
• calculated expenditures for each year, for 6 years and possible refresh in year 7.
Here are 4 different scenarios:
- Pricing Model 1- You purchase all of the software outright as perpetual licenses. There are no further payments until year 7 where you have to re-buy all the software again. This model has high capital cost but no operational cost thereafter.
- Pricing Model 2- You buy Exchange 2016 Server outright (perpetual license) and you “rent” the Office Suite (Office 365 plan) by paying an annual fee. This model has a lower capital cost and you are always entitled to the latest version of MS Office suite. You are also allowed to load five copies of MS office per licensed user (Desktop, Notebook, Tablet, Phone, etc.) In year 7, you must re-buy Exchange licenses but MS Office is simply the annual renewal.
- Pricing Model 3- This is “lease to buy” program. You purchase all of the software outright as perpetual licenses but pay for it over three years. You do not own the software until after year 3. After year 3 you can stop payments and own the current software version or you can continue to pay an annual subscription which provides legal entitlement to the most current version. This model has the highest 7 year TCO.
- Pricing Model 4 – Office 365 E3 is a model where Microsoft provides the MS Office suite and also hosts the email system in their Datacenter with unlimited email storage for in-place archiving. Although this option is a consideration, much of the flexibility with an on premise solution is lost with the hosted solution (maybe a subject of a separate blog).
And here are the results:
Which option would you choose for your organization?