The Real Cost of Hosting Applications In-House

Jim Smith, Co-Founder and COO of LoadSpring Solutions, has spent more than 25 years helping organizations manage the applications and technology that support complex project delivery.

TL;DR

The real cost of hosting applications in-house is more than infrastructure. Total cost = infrastructure + software + IT labor + security + backups and recovery + updates and upgrades + support + downtime. Comparing that full cost, not just servers or cloud spend, is the best way to determine whether in-house or managed hosting is more cost-effective.

Why In-House Application Hosting Costs More Than It Appears

Hosting a business-critical application yourself can look less expensive on paper. You already have an IT team. You may already own infrastructure or have a cloud environment. So why pay someone else to host and manage it?

Because infrastructure is only part of the cost.

The real cost of hosting applications internally includes the people, tools and ongoing work required to keep those applications secure, available, backed up, updated and supported. For applications like Primavera P6, Sequence Enterprise (EcoSys), Sage and ArcGIS, those costs can add up quickly.

What Does It Cost to Host an Application Internally?

A true total cost of ownership calculation goes beyond servers or monthly cloud consumption.

IBM defines total cost of ownership as the full cost of a technology over its life, including setup, personnel, maintenance, upgrades and downtime.

For internally hosted applications, that means looking at the following costs.

1. Infrastructure and Cloud Resources

Whether apps run in your own data center or in AWS, Azure, or another public cloud, the infrastructure has a cost.

That may include:

• Compute and storage

• Database infrastructure

• Networking

• Backup capacity

• Disaster recovery infrastructure

• Security tools

• Operating system and supporting software

• Cloud consumption and data transfer

Moving an application to a public cloud can change these costs. But it does not eliminate the work required to manage the environment.

2. Software and Licensing

Infrastructure often depends on additional software to operate and manage the application environment.

Depending on the application and architecture, costs may include operating systems, databases, management tools and other supporting software.

These costs should be included when calculating the full cost of hosting the application.

3. IT Labor

This is one of the easiest costs to underestimate.

Someone still has to provision environments, monitor performance, manage access, troubleshoot problems, maintain databases, perform upgrades, verify backups and respond when something goes wrong.

For specialized project applications, that work may require knowledge of both the infrastructure and the application itself.

And there is an opportunity cost. Every hour an IT team spends maintaining application infrastructure is an hour it cannot spend on cybersecurity, modernization, automation or other strategic priorities.

4. Security and Access Management

Application hosting also creates an ongoing security workload.

Internal teams may be responsible for:

• Security monitoring

• Patching

• Identity and access management

• Network security

• Fixing security vulnerabilities

• Security configuration

• Audit and compliance support

These aren't one-time implementation tasks. They continue for as long as the application is running.

5. Backups and Disaster Recovery

Having a backup is not the same as having a recovery strategy.

Organizations must decide what data to back up, how often backups run, how long to retain them and how applications will be restored after a failure.

NIST's contingency-planning guidance specifically connects system criticality and recovery objectives with decisions about backup frequency, redundancy, data mirroring and alternate recovery environments.

That requires infrastructure, processes, testing and people.

6. Application Updates and Upgrades

Applications do not remain static.

Operating systems change. Databases need maintenance. Application vendors release new versions. Security patches need to be applied. Integrations and dependencies need to continue working.

Each change has to be planned, tested and deployed without disrupting users.

With multiple project applications, this workload compounds.

7. Monitoring and Support

Project-critical applications need more than infrastructure that is technically online.

Teams need someone monitoring availability and performance and someone to call when an application is slow, inaccessible or behaving unexpectedly.

The cost isn't just the support staff. It's also the productivity lost while users wait for an issue to be diagnosed and resolved.

8. Downtime and Lost Productivity

Downtime is one of the hardest hosting costs to see in a budget because it usually appears somewhere else.

When a scheduling, estimating, GIS or project controls application becomes unavailable, the hosting line item doesn't increase. Instead, project teams lose productive time, IT staff are pulled into troubleshooting, and critical work is delayed.

That makes availability and recovery part of the economic equation, not simply a technical metric.

Public Cloud Doesn't Necessarily Mean Fully Managed

Moving an internally hosted application from a data center to a public cloud can eliminate some physical infrastructure responsibilities.

But it doesn't necessarily eliminate application management.

Your team may still be responsible for configuring the environment, administering the application, monitoring it, securing it, managing backups, performing upgrades and supporting users.

That's an important distinction when comparing the cost of a generic cloud environment with managed application hosting.

How Managed Hosting Changes the Cost Model

Managed hosting combines the infrastructure with the operational work required to keep the application running.

With LoadSpring Managed Hosting, LoadSpring takes responsibility for infrastructure, security, application administration, monitoring, backups, updates and support for project-critical applications.

The difference becomes clearer when those responsibilities are included in the cost comparison. LoadSpring's TCO comparison shows up to 40% lower first-year TCO compared with on-premises hosting and up to 27% lower first-year TCO compared with generic cloud environments.

The comparison therefore isn't simply internal infrastructure vs. hosting fee. It's the fully burdened cost of operating the application internally vs. the cost of having the environment managed for you.

For a detailed cost breakdown, see our Total Cost of Ownership Comparison: Cloud vs. On-Premises.

How to Calculate Your In-House Application Hosting Cost

Before comparing hosting options, estimate what you currently spend across these areas:

The exact cost will vary by organization. For an accurate comparison, include the same scope of responsibility for both internal hosting and managed hosting.

A low infrastructure cost doesn't necessarily mean a low hosting cost if your internal team is supplying everything else.

Related reading: Managed Application Hosting: Is It Worth It?

When Does Managed Hosting Make Sense?

Managing applications internally can make sense when an organization already has the infrastructure, expertise, capacity and operational processes required to support them efficiently.

Managed hosting is worth evaluating when:

• Application management is consuming significant IT resources

• Specialized expertise is difficult to maintain

• Environments need to support distributed teams

• The organization wants more predictable responsibility for availability, security, backups, administration and support

• Joint venture partners, many of which compete on other projects, require custom security, reporting and support

The question isn't whether your IT team can host the applications.

It's whether running those applications internally is the best use of your IT resources.

See If Managed Hosting Makes Sense for You

Talk with LoadSpring about your current applications, environment and support needs to see where managed hosting could reduce costs and take day-to-day application management off your IT team.