Cloud Email Vs On-Premise Setup: A Step-by-step Cost Benefit Analysis

Making a choice between on-premise email solution and a cloud email solution? 

Look no further. This comprehensive document highlights the Total Cost of Ownership (TCO) for a business having 7,500 mailboxes (as a sample) evaluating the two popular email options.

Cloud setups by their very nature follow the Opex model of costing. On-premise setups are typically a combination of Capex and Opex costs. For on-premise setups, there is a fixed upfront cost to purchase equipment, servers, storage etc and then an ongoing Opex cost to maintain and run this setup.

To make an apple to apple comparison between a Capex intensive on premise setup and an Opex based cloud setup, we have assumed a lifetime for all capex purchased and converted these expenses into annual opex costs.

Also, for the sake of creating this document, we have assumed an on-premise Mithi Connect Xf setup and have compared it with the Mithi SkyConnect cloud email service.

If a similar exercise is done for any other product and service, the results would be quite similar. While the content may vary, the context is the same.


The following are the goals of the proposed email setups, so that the two architectures, on-premise, and cloud, are designed to deliver on these goals.

Number of users Architecture sizing supports a user base in this range Quantity 7,500
  Uptime required System should be extremely reliable (RTO=near zero) % 99.9
  Data Durability Data should be safe, secure and extremely durable (RPO=0) % 100

Basic Assumptions

For the sake of computing the on-premise equipment cost, the following assumptions have been made. These are in-line with Industry standards.

AMC Maintenance price per year as a percentage of original price % 20
Life of equipment Period after which, equipment needs refresh years 5

We would need to start by defining the ideal architecture for an on-premise setup so that we can arrive at its annual bill of material.

What is an On Premise Email Solution Architecture?

In Premise Email setup

On Premise Setup and Cost for a 7,500 user workload

The picture above illustrates the basic infrastructure to host a 7,500 user email workload. It also demonstrates the various teams required to maintain and monitor the setup.

Thus to make this setup possible we will need the following components:

Site Component Annual recurring cost (opex) USD Description
Primary Site Infrastructure 1 Mail server 2,700 Active mail server receiving and storing mail.
1 redundant mail server (Passive Hot standby) 2,700 To cluster the mail server for redundancy to handle local mail server failures
1 Front End Server 2,160 Users access the services via this server
SAN Storage volume (10TB) 1,350 Mails are stored on this
Backup system 3,240 Periodic backups to secondary medium
1 Email security Gateway 12,150 Mails are scrubbed for malware through this appliance
Data center costs 3,000 Running cost per year to host the equipment
Bandwidth costs 7,500 Cost of b/w for mail flow and mail access
DR site Infrastructure 1 Mail server 2,700 Active mail server receiving and storing mail.
1 Front End Server 2,700 Users access the services via this server
SAN Storage volume (10TB) 1,350 Mails are stored on this
1 Email security Gateway 12,150 Mails are scrubbed for malware through this appliance
Data center costs 3,000 Running cost per year to host the equipment
Bandwidth costs 5,000 Cost of b/w to replicate data continuously
Services 24/7 NOC to monitor Primary and DR site 27,000 NOC team to ensure uptime
L1 helpdesk Team 13,500 Team to provision users, set policies, study reports etc
Digital eyes and ears (monitoring) 750 Automated monitoring for resources at both DCs
Software Costs Operating System for 5 servers across both sites 3,995 Subscription for Red Hat Linux OS for 2 Mail servers, 2 redundant mail servers, 1 front-end server
Mithi Connect Xf 56,250 Subscription for Mithi’s Connect Xf enterprise email software
  TOTAL USD 163,195  
  Effective per user per year rate 22

Cloud Email Solution Architecture

The image below represents a cloud-based SaaS solution architecture which achieves the goals and delivers strong benefits beyond that too.

SaaS on Cloud Email & archival Setup

 Cloud Setup and Cost for 7,500 users

For a SaaS service, you don’t have to provision any infrastructure. Simply sign up, provision users and consume the services. The table below represents the total annual cost of running a setup of this architecture.
Site Component Annual recurring cost (opex) USD Description
Infrastructure Bandwidth costs (15 MBPS) 10,000 Cost of b/w for mail access
Services L1 Helpdesk team 13,500 Team to provision users, set policies, study reports etc
SaaS Mithi SkyConnect SaaS cloud service 82,500 Subscription for Mithi’s Connect Xf enterprise email software
  TOTAL USD 106,000  
  Effective per user per year rate 14

Comparison – On Premise vs Cloud Setup

The tables below summarize the above mentioned numbers and demonstrates that the cloud setup is more cost effective than an on-premise setup and offers tremendous benefits in terms of reliability, security and ease of scale, which cannot be easily quantified (problems in these areas lead to frequent downtime, data loss and dips in performance, which impact productivity)
The Cost Comparison

The table below suggests your cost areas while running an email setup. Observe that for a cloud setup all the factors are included as part fo the service offering and also guaranteed.

  In Premise Email Setup Cloud Email Setup
Effective per user per year cost 22 14
Cost Model Capex + Opex Opex
Infrastructure At your cost, which varies with your goals All inclusive and fully managed, rate fixed at whatever your size of deployment
At your cost – A MASSIVE DESIGN EFFORT, which must consider DATA SAFETY, UPTIME, DATA DURABILITY, and DISASTER RECOVERY site All inclusive – GUARANTEE of 99.9% UPTIME & DATA DURABILITY of 99.999999999%, and DR INCLUDED
Security At your cost – SECURITY NEEDS SPECIAL EFFORT to consider PHYSICAL SECURITY, DATA SECURITY, EMAIL SECURITY, NETWORK SECURITY, and ongoing maintenance ALL INCLUDED WITH THE SERVICE. All you have to do is configure your email usage policies
Scalability At your cost – A CHALLENGE when considering UPGRADING, SCALING, via long purchase and deployment cycles INCLUDED WITH THE SERVICE. WE GROW WITH YOU

The Benefit Comparison

The table below shows that besides being lower cost, how a cloud email service offers a plethora of benefits, which future proff your investments and are totally de-risked from lock in contracts, aging assets, management issues, etc

    In Premise Email Setup Cloud Email Setup
Delivery Model Responsibility You deploy and maintain the infra and application using your internal resources Fully managed, SLA backed service, ready for you to simply consume.
  On-boarding Procure equipment, deploy, test, optimize, manage and maintain all of which can take a long time to get started Get started immediately. Provision your setup in less than a day and you can start consuming.
Data center Not feasible (and also not your business goal) to invest in converting your DC to tier 4 level reliability, getting certified at multiple levels, building in power and colling redundancies, and more. AWS Cloud DC is carrier grade, multi region, with multiple certifications, built in redundancies and multiple physical Availability zones in one region. Certified from ISO, CMM, CERT etc for various parameters and compliance
Provisioning *Needs upfront provisioning even for future workloads. Can get wasted if there is a downsize. * No upfront provisioning required
* Simple monthly billing as per consumption = pay as you go, pay per use, grow/shrink anytime.
* No fixed contracts, cancel anytime with no liability.
Technology refresh *Fixed, static technology for a period of 5 years
*During a refresh, these become dead assets.
*No easy upgrade without risk or major downtime
*Infra automatically renewed/upgraded by cloud provider ensuring that our solution is always on a high performance & latest platform
Scalability * Scaling is not easy due to long procurement cycles
* Scaling often requires a rearchitecture, leading to downtimes, risk of data loss and drop in productivity.
*Allows us scale up/down/out with ease at the click of a button
*Elastic infinite cloud storage, means no upfront provisioning and no projected need. Scales on demand
Uptime *Reliability and Redundancy has to be built into the infrastructure and application by careful planning, provisioning of extra resources and automated or manual processes *Infrastructure guaranteed at 99.9% uptime by AWS.
*Application designed with redundancy, auto scale, hierarchical storage and more to deliver on uptime promise
Data Safety and Durability *Data Durability goal needs redundancy in storage, strong frequent backups, and sync to DR Site.
* Needs a separate backup system copy critical data periodically from the mail server. Reliability of this system also has to be factored in, leading to higher costs
And yet, this can almost NEVER achieve an RPO of zero.
*Cloud storage provides a data durability of 99.999999999% allowing the solution to provide an RPO of zero
*Thanks to extreme data durabiility offered by cloud storage, backup of the data is built into the architecture
Monitoring and NOC You need to deploy automation tools to monitor service and infrastructure uptime and also provision a 24/7 team to work in shifts to monitor and maintain the setup. Mithi uses a combination of digital eyes and ears along SOPs, and a well trained 24/7 NOC maintain uptime.
Disaster recovery *DR site has to be provisioned to achieve goals of 99.9% uptime *DR built into the architecture. By over provisioning using the availability zones for our infrastructure, helps us deliver on our guaranteed promise of 99.9% application uptime.
Security Responsibility Thanks to mounting cyber security attacks/threats, SECURITY NEEDS SPECIAL EFFORT BY YOU ALL INCLUDED WITH THE SERVICE. All you have to do is configure your email usage policies
Infrastructure security *Physical security of the infrastructure has to be planned, built in and monitored. * Infrastructure secured by cloud provider to ensure privacy and safety of the resources
Data Security *Data has to be stored encrypted with controlled limited access. You need to design tis into your info sec working. * Encryption of data, access control, mail usage policy control built into the infrastructure.
Email Security *A gateway mail solution (scrubbing) has to be deployed * Integrated high performance guaranteed Mail scrubbing service (in partnership with Trend Micro HES) to detect mailware.
Network Security * Have to design and build in WAFs, Intrusion detection systems, Attack mitigation systems, TLS, etc * Resources secured at multiple layers with IAM, athorisation, VPCs, WAFs, Firewalls, TLS and more
Data Ownership * Data is captive within your own physical environment * Even though the data is stored on the cloud, the data is entirely yours and you can take the data whenever you want using multiple ways to download the data. We dont own or control your data.
Ongoing Infra security * Regular VAPT and other analysis needs to be done to ensure hygiene * Part of the IaaS
Scale up/out Upgrading or scaling out the hardware, need to go through the long purchase cycles since they are capex. At the push of a button, we can provision larger instances, more storage and scale geographies.
Updates/Upgrades Upgrade deployments are typically delayed to avoid downtimes and stay away from change, leading to the customer using older versions and losing out on the benefit of the newer versions. Continuously upgraded to ensure that the customer is always using the latest capabilities


A cloud Solution delivers on the solution goals, while being 2/3rd the price of a comparable in-premise solution. In addition, it also delivers multiple other benefits of security, scalability, upgradability, etc, which make it a compelling value proposition.
(*) The rates are got from reliable sources on the Internet. Even though they are subject to change or may vary, they give a good indication of the cost and allow building out a comparison.
Feel free to contact us, to get a working of each of the above costs

An entrepreneur making a big impact on business team collaboration and enterprise data management using SaaS solutions architected with Artificial Intelligence, Big Data warehousing, Deep ediscovery, Mobility and Cloud platforms.

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