Microsoft 365 & Cloud
Does cloud computing save money? A worked comparison for a UK business with an ageing server
Whether the cloud saves money for a UK SME: a worked server-refresh versus Microsoft 365 comparison, hidden costs that erode savings and when on-premises wins.
By Dig IT SolutionsUpdated 8 September 20266 min read
Short answer
Cloud computing usually saves money for a UK business of up to 250 people when the alternative is replacing an on-premises server, because it removes hardware, maintenance, power, backup infrastructure and the £150-a-month class of server support. It saves less, or nothing, when data volumes are very large, applications must stay on site, or licences sprawl unmonitored.
"Move to the cloud and save money" is one of those claims that is true often enough to be repeated and false often enough to be worth checking. For a business of up to 250 people whose main decision is whether to replace an ageing server or retire it, the answer is usually yes. For a few businesses it is no. This article works through a realistic comparison, lists the costs that quietly erode the saving, and describes the cases where on-premises still wins.
Where the savings come from
The cloud saves money in five places, and most of them are about the server you no longer own.
No capital purchase. A server, its operating system and client licences, a backup appliance, a UPS and installation are bought up front and refreshed every five to seven years. A subscription replaces that with a monthly fee.
Less support. A server needs patching, monitoring, backup management, firmware updates and eventually emergency repairs. Our indicative support rate for a server is £150 a month, against £17.50 for a laptop, which tells you how much attention one takes. Retire the server and that line goes.
No power, cooling or cupboard. A server runs continuously and needs somewhere to live. Small individually, real over five years.
Backup infrastructure. On-premises data needs local backup hardware and off-site copies. Cloud data still needs backing up, but with a software subscription rather than an appliance.
Scaling without over-buying. A server is sized for the business in five years' time, so it is oversized today. Cloud capacity is bought as needed, monthly.
The sixth saving, downtime avoided, is real but harder to count. A single server is a single point of failure. Microsoft's platform is not.
A worked comparison: 25-person office, server at end of life
The scenario: a 25-person professional services firm with a Windows server that holds files, runs email through Exchange, and is out of warranty. The choice is replace it or move to Microsoft 365. Figures are illustrative to show the shape of the comparison. Our own support rates are indicative February 2025 figures, subject to confirmation. Hardware and licence prices vary and should be quoted.
Option A: replace the server
| Cost line | Basis | Five-year cost |
|---|---|---|
| Server hardware, Windows Server licence, client access licences, UPS, backup appliance and software, installation | One-off capital, illustrative | Several thousand pounds, call it £8,000 for the model |
| Server support | £150 per month, indicative | £9,000 |
| Power and cooling | Continuous running, illustrative | Low hundreds a year, call it £1,500 |
| Off-site backup service | Subscription, illustrative | £2,400 |
| Exchange and Office licensing on premises | Varies, often already moving to subscription | Excluded for simplicity |
| **Total** | **About £20,900 plus a refresh looming in year five** |
Option B: Microsoft 365 with the server retired
| Cost line | Basis | Five-year cost |
|---|---|---|
| Microsoft 365 licences | 25 users at a Business plan rate, quoted at the time, illustrative at roughly £10 to £20 per user per month | £15,000 to £30,000 |
| Migration project | One-off, quoted | Low thousands, call it £3,000 |
| Microsoft 365 backup | Third-party, per user, illustrative | £3,000 |
| Server support | None | £0 |
| Power, backup appliance, refresh | None | £0 |
| **Total** | **About £21,000 to £36,000** |
On these numbers, cloud is roughly level with or more expensive than the server. So why do most firms in this position move?
Because the comparison is not complete. Option A excludes the Office and Exchange licensing that Option B includes, and most businesses are already paying Microsoft for Office by subscription. Add that back, at say £8 per user per month, and Option A rises by £12,000 over five years to about £33,000. Option B also includes SharePoint, Teams, OneDrive, mobile access and the security tooling in the Business Premium plans, none of which the server provides. And Option A has a second server purchase waiting in year six.
The fair reading: for a firm of this size the cloud is usually somewhat cheaper over five years and considerably better, with the saving driven by what you stop paying for rather than by the subscription being cheap. For a firm that already has Office by subscription and a server that only holds files, the saving is clearer still. Our page on cloud migration covers how the move is scoped.
The costs that erode the saving
Businesses that end up spending more in the cloud than expected almost always do so for one of these reasons.
- Licence sprawl. Leavers' licences left active. Premium licences assigned to people who need basic. Nobody reconciling licences against headcount monthly.
- Storage growth. SharePoint and OneDrive storage is generous but not unlimited, and file shares migrated without pruning fill it.
- Forgetting backup. Microsoft's retention is not a backup. Deleted items age out and ransomware syncs. A third-party backup for Microsoft 365 is a line item, and Microsoft's own shared responsibility documentation makes clear that your data is your responsibility.
- Broadband. Everything now goes over the internet connection. Some sites need an upgrade, or a second line.
- Azure resources left running. Virtual machines and storage created for a test and never removed.
- Migration surprises. Old data, odd permissions, and applications nobody remembered depended on the server.
- Egress and transfer fees. Rare at SME scale, but real if you move large volumes in and out of Azure.
All of these are management problems, which is why a cloud environment still needs someone managing it. What that looks like is described in what is managed IT support?.
When on-premises still wins
- A line-of-business application that will not run in the cloud, or whose vendor will not support it there.
- Very large data volumes accessed constantly, such as CAD, video or imaging, where the internet link would be the bottleneck.
- Poor or unreliable connectivity at the site, with no affordable upgrade.
- A regulatory or contractual requirement for on-site hosting.
- Heavy on-site hardware that depends on a local server, such as some manufacturing and warehouse systems.
Most businesses in these situations end up hybrid: Microsoft 365 for email, files and collaboration, one server kept for the application that cannot move, backed up to the cloud. That is a perfectly good answer and cheaper than two servers.
Three short examples
A consultancy of 12 retired a file and email server, moved to Microsoft 365 Business Premium, and dropped server support, a backup appliance and a refresh they had budgeted for. Their monthly IT spend fell and their staff could work from client sites for the first time.
An accountancy practice of 30 kept a server for its practice management software, which the vendor would not support in the cloud, and moved everything else. The server now does one job, is backed up nightly to the cloud, and the second server they had planned was never bought. Our IT support for accountants page describes the pattern.
A plant hire business with several depots uses Microsoft 365 and SharePoint across sites but keeps Windows servers for depot operations, connected by site-to-site VPN with local and cloud backup. The cloud reduced what the servers do rather than removing them. See the Mr Plant Hire case study.
How to run the comparison for your own business
- List what the server actually does: files, email, applications, print, authentication.
- For each, identify the cloud equivalent and whether the application vendor supports it.
- Price the server replacement over five years: hardware, licences, support, power, backup, refresh.
- Price the cloud over five years: licences, migration, backup, connectivity upgrade, support for what remains.
- Add what you are already paying Microsoft for Office to the server column.
- Compare the five-year totals, then ask which option leaves you with a single point of failure.
What to do next
If your server is out of warranty and you would like the comparison run on your real numbers, the IT support cost calculator will show you what support costs with and without a server, and a short scoping call can put licence and migration figures alongside it. Most businesses have the answer within a week.