Hosting: Do it yourself or pay someone?

At some point of time everyone will be faced with this question. Do I pay a hosting company or do I purchase my own hardware and software and host myself?

I do not have a strong preference for either method. Some of my clients pay for hosting while others choose to host in-house. Below are my thoughts and observations on both methods:

Paying someone:

PROS: The system well-being, maintenance, upgrades, etc is not your responsibility. If something goes wrong generally there is a dedicated team of professionals ready to help.

CONS: Payments never stop. Hosting company may impose some very inconvenient limitations.

Hosting yourself:

PROS: Lower cost long-term. The only limitations are the limitations of hardware and software you buy.

CONS: If something goes wrong it’s your responsibility to fix it.

Financial aspect: DO NOT think that if you host yourself the expenses will end after the initial purchase. While today’s hardware and software generally work well mankind has not yet invented a self-maintaining, let alone self-troubleshooting system. For best results always allocate budget for a professional to routinely monitor your system. That way most problems could be detected early and corrected before they cause the system to go down.

An important thing to consider is when you reach what I call the break-even point. An example. Let’s say a hosting company will host your system for $3000 per month. Or you can invest $100,000 initially to build your own and then spend on average $300 per month maintaining it. Let’s assume the useful lifetime of the system to be 7 years. Thus lifetime what you would pay for a hosted solution is 3000x12x7=$252,000. If you choose to host your own overall you will pay 100,000+300x12x7=$125,200. Overall that’s twice less, but you paid almost all of it upfront. With monthly payments you exceed $100,000 towards the end of 3rd year. Factoring in maintenance costs break-even point will occur some time in the beginning of year number 4.

In my opinion if a break-even occurs after year number 3 a hosted solution is well-priced and is worth serious consideration. If it occurs in year number 1 or 2 it’s probably overpriced.

Another thing to consider is the difference between 99% uptime versus 99.9% uptime. Usually that is measured yearly.

If you bought good hardware, set it up in a good environment and are using good, stable software you can very reasonably expect 99% uptime from your system. Now, what is 1% of a year? That would be 3.65 days. So say I set you up with a system and guaranteed 99% uptime. Say it worked for a couple of years, then it went down and it took me 3 days to fix it. Guess what – I have still kept my promise. Question is can you afford to have 3 days of downtime?

On the other hand .1% of a year is about 8 hours. Now, to guarantee uptime like that one would have to have very serious redundancy measures in place and a team of professionals always available to immediately jump onto any problem that may happen. Those things cost money and when a hosting company guarantees you 99.9% uptime that’s what you are paying for. If having the system down for a couple of days could seriously hurt your business it may be worth the expense.

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