Dedicated vs. Cloud: How Much Does a Server Cost?

How much does a server cost? You want the best solution for your business, but you’re working within a budget. In short, you need to decide between cloud vs. dedicated server, and you want to ensure you’re making the decision that gets you the best value for your money. 

From the perspective of pure operating expenses, the price tag each month on a cloud service is likely to be lower for many use cases, but that doesn’t necessarily mean the cloud is the right fit for your workload. 

Evaluating dedicated vs. cloud servers solely on monthly cost alone is a mistake. There are other factors that should shape your decision. There are both hard and soft costs that can impact the total cost of ownership (TCO) and overall client experience.

We can compare dedicated and cloud server pricing through the lens of eight different considerations:

1. Server Set-Up Timeline
2. Compliance Requirements
3. Configuration, Management, and Support Needs
4. Workload Input/Output Considerations
5. Demand Consistency
6. Anticipated Upgrades
7. CapEx vs. OpEx Pricing Needs
8. Talent-Related Costs
9. Resource Management in Dedicated vs. Cloud Servers
10. Payment Models and Hidden Costs

Dedicated vs. Cloud Pricing: How Much Does a Server Cost?

A recent analysis by SherWeb put the average monthly cost of a cloud server at $313.90 vs. a dedicated, on-premises server at $1,476.31. This estimate took into account the technology refresh rate, scaling needs, and the indirect cost of system administration staffing.

While this analysis gives you a ballpark comparison range, you'll want to make a more detailed estimate based on your organization's needs.

When deciding whether cloud or dedicated server resources are the best match for your organization, it’s important to consider factors such as timelines, compliance requirements, the consistency of your workload demand, internal staff talent, and more. Read on for insider analysis of the factors that can really impact the cost of data hosting options, and how to tell which is best for you.

Related Read: Virtual Servers vs. Physical Servers: Which is Best?

1. Server Set-Up Timeline

Cloud resources are best know for their on-demand capabilities. If you need to provision a server within minutes, virtual resources are likely to be your best bet–if you have expert cloud staff in-house. 

While a leading data services vendor can provide expedient service to help you meet a fast turn-around for dedicated server setup, there’s almost always a longer timeline associated with this option.

2. Compliance Requirements

Your industry, data, workload, or compliance needs may dictate the adoption of a dedicated server instead of shared cloud resources. Depending on your organization’s regulatory requirements, the costs associated with non-compliance can be immense.

As one example of regulatory risk, the General Data Protection Act took effect in late May 2018. GDPR-impacted organizations found in non-compliance may be subject to penalties “up to €20 million, or 4% of the worldwide annual revenue of the prior financial year”–whichever is higher.

3. Configuration, Management, and Support Needs

Workloads that require constant fine-tuning for continual scaling, provisioning, and frequent management may be better served by cloud resources. In contrast, workloads that are more stable are overall better fits for dedicated servers. 

However, these two factors are not absolutes and largely depend on the workload, the expertise of your organization’s information technology and cloud staff, and the responsiveness of your data vendor.

With dedicated servers, organizations are reliant on vendor support to perform management and provisioning updates. With a highly-responsive vendor, these updates can be immediate. If your organization lacks skilled cloud staff in-house, outsourcing your data can provide superior performance, security, and cost optimization to using cloud resources. 

With the wrong vendor, you may find your organization waiting at length for necessary updates to server configurations. The key here is carefully vetting prospective business partnerships to ensure you select a data provider who meets your needs and expectations.

4. Workload Input/Output Considerations

For certain types of workloads, such as the high input/output (I/O) workloads associated with large databases, a dedicated server may be the cheaper option. In-depth calculations published on Rackspace demonstrate that heavy utilization costs with a popular cloud host can exceed the costs of dedicated servers over time.

If your organization’s workload is consistently or frequently high-demand, as opposed to occasionally high-demand, it may be cheaper to maintain dedicated servers instead of using cloud resources.

5. Demand Consistency

Around 2010, computer science researchers proposed that the majority of business workloads are candidates for virtualization, or being moved to shared cloud resources because they generally use “fractions of a CPU or a few gigabytes of RAM.” 

For the times when workloads hit a peak, virtualized environments enable these organizations to quickly scale up resources as needed. For organizations with consistently high demand, dedicated server capacity is likely the more cost-effective option.

6. Anticipated Upgrades

An additional factor to consider beyond pure cost is the quality of service, and its potential impact on customer satisfaction, availability, business reputation, and related factors. Downtime can have a devastating impact on business productivity and client churn.

If your workload has particular demands on a server, your needs may be best matched with a dedicated server that can be upgraded and configured to meet the needs of high-demand workloads, such as high-volume video streaming or high-traffic websites.

While these upgrades are rarely cheap, you can maintain control and quality by performing upgrades such as increased memory, added network cards, or the addition of non-volatile memory disks.

7. CapEx vs. OpEx Pricing Needs

Cloud servers are billed at a monthly rate, which is largely predictable. This pricing structure is known as an operational expenditure, or OpEx model. Dedicated servers have a significant upfront cost, which is followed by lower monthly costs of maintenance and service. These fit into the category of capital expenditures or CapEx.

While the benefits of CapEx vs. OpEx are rarely enough to sway an organization in one direction when selecting between cloud vs. dedicated servers, it's one factor to consider. 

Organizations may prefer to spread expenses out over time as opposed to initial investments with the OpEx model of the cloud or use the depreciation write-offs associated with a dedicated server. Obviously, if you're in startup mode, an OpEx model may work best as you are preserving capital for other aspects of your business.

8. Talent-Related Costs

Regardless of whether your organization selects a cloud or dedicated server, you’ll need to create a plan for migration, provisioning, testing, and ongoing maintenance. This will include some reliance on a third-party vendor, to a greater or lesser extent depending on how much virtualization or data talent your organization has in-house. Your ability to optimize by cost here depends on existing talent and vendor relationships.

With either path–cloud or dedicated servers–the wrong vendor partnership can lead to talent and time-related nightmares. Data and cloud talent is short, and hiring expert staff could prove extremely challenging.

If your new vendor’s support isn’t as promised, you may struggle to adjust your workloads to meet needs. In contrast, fully outsourcing your workloads to a dedicated server with a trusted local vendor with an excellent customer service record could ease internal talent woes during a tech talent shortage. The key is being realistic about your internal talent competencies and smart vendor selection processes.

9. Resource Management in Dedicated vs. Cloud Servers

Understanding how your server optimizes resources is crucial for performance and cost-effectiveness. 

Cloud servers offer rapid deployment and redundant infrastructure for optimal resource use. This provides advantages like:

• Rapid Deployment: New servers can be instantly created.
• Increased Automation: Empowered by a robust API for efficient management.
• Enhanced Uptime: Redundant components elevate overall performance.
• Scalability on Demand: Resources scale up instantly as demand spikes.
• Pay-as-You-Go: Only pay for what you use.

However, cloud servers can come with decreased access to CPU, memory, and disk space.

Dedicated servers provide exclusive access to CPU, RAM, and storage, which offers advantages such as:

• Access to Abundant Resources: Larger amounts of CPU, RAM, and storage.
• No Up-front Hardware Costs: No initial investment in hardware.
• Isolation: Not sharing the server with any other users.
• Custom Configurations: Tailor hardware configurations based on specific needs.

There are some drawbacks to dedicated servers: limited scalability, resource underutilization, and longer deployment times.

10. Payment Models and Hidden Costs

The choice between cloud and dedicated servers extends beyond a simple price tag; it's about understanding the nuanced landscape of hosting expenses.

Cloud Servers

• Advantages: Rapid deployment, scalable resources, pay-as-you-go, redundant infrastructure.
• Considerations: Higher monthly costs, idle resource fees, post-paid billing.

Dedicated Servers

• Advantages: Exclusive resource access, no upfront hardware costs, long-term efficiency.
• Considerations: Limited scalability, potential resource underuse, pre-paid billing.
  

Dedicated Server vs. Cloud Server, Pricing, Solutions, and More

For many businesses, instead of asking "How much does a server cost?" you might want to consider the middle ground, or more specifically, some combination of cloud and dedicated server resources. According to RightScale research, 51 percent of organizations have a hybrid cloud strategy in 2018–defined as a cloud strategy that combines the use of public and private, or dedicated, cloud resources.

A trusted vendor can listen carefully to help you understand your needs and requirements and optimize your budget from the perspective of risk mitigation, availability, ease-of-use, and other angles that matter. Depending on your use cases, you may benefit from a mixture of private cloud, public cloud, dedicated server, colocation workloads, or just one of these many approaches.

It’s important to consider streamlining your solutions once you have made your choice. For example, if you are currently running on Microsoft 365, you should explore using Microsoft Teams for your UCaaS solution.

The right vendor will steer you in the right direction for your business. As a result, Atlantech Online knows that the first step to optimizing your business data is picking the right vendor partnership. To learn how to select the right data partner, download the free eBook: 10 Questions To Ask Before You buy Data Center Services For Your Business.