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Does Office 365 save you money?

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Seems like everyone is getting into or looking into the cloud these days. I started looking at Office 365 from a SharePoint point of view and started to get interested in the bigger picture. So, what is the big deal? It comes down to dollars and cents (like most things).  Getting rid of all those servers and trimming your IT staff can save you lots of money. No more late night memory replacements and lower utility bills. Definitely sounds like a win-win (unless you are one of those IT people). Let’s down to the numbers to see how it plays out. For our example we will use a company of about 1000 people.

What you get

• Office Professional Plus
• Exchange Online
• SharePoint Online
• Lync Online
• Backups
• 24/7 service
• Patched and updated software

What it costs

Office 365 is still in beta but the enterprise version is listed at $24 dollars per person or a total of $288,000/year. That seemed like a lot to me until I started thinking about what it took to provide those same services on premise.

What it replaces

This is a guesstimate since each organization has different needs and a different setup. That being said you can probably view this as a minimum. In any case, it is a starting point for you to start making decisions for yourself.

• 7 servers (3 for Exchange, 2 for SharePoint, one for Lync, and one for backup)
• Storage for servers which would normally be a collection of hard drives and a SAN implementation.
• 1000 copies of Office Professional plus.
• 1000 SharePoint CALs
• 1000 Lync CALs
• 1000 Exchange CALs
• 1 SQL Server license
• 3 Exchange Server licenses
• 1 SharePoint Server license
• Backup server software license
• At least two IT people
• Power and space (i.e. rent) for all the equipment and people.

Does it make sense?

Everyone seems to have different licensing and costs for the items above so I am not going to add up the cost, but it would be hard for a company to come in at under $288,000 (or $288 per person per year). The costs of maintaining on-premise equipment will probably stay the same and cloud services are coming out at competitive numbers. The main barriers seem to be psychological and political. Getting rid of people is never a popular idea and that is where the real savings are realized. You will not be able to get rid of your IT staff by using Office 365 but you can have a team that is focused on internal applications specific to the business at hand. Odds are, you aren’t in the IT business and it is seen as an overhead cost that affects the bottom line. In this case, Office 365 is definitely worth looking at as a way to streamline your business.

Comments

You're missing a big piece of the cost

Submitted by Christian Buckley March 01, 2011 - 11:30 AM

And that is having control over your environment. Yes, it can dramatically reduce the cost to maintain the "plain vanilla" version of SharePoint, but you will be highly restricted on what you can customize. Sandoxed Solutions are not a panacea, as some solutions may be limited restricted even through they "pass" the sandbox becuase, at the end of the day, Microsoft has to support it, and they are going to manage their risks. Most enterprises will want something much more robust, with multiple points of integration.
I think Office365 is a great option for many companies, but for the large enterprise, it may just be a piece of the solution (possibly as an extranet for customer and partner interaction).

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