Moving from on-premises infrastructure to the cloud is one of the most significant IT decisions an organisation can make. A proper TCO analysis is what separates a confident migration from an expensive mistake.
The On-Premises Cost Iceberg
Most people focus only on visible costs. The real structure looks like an iceberg:
- Visible: Server hardware, network equipment, software licences
- Hidden (2–3x the visible costs): Data centre space, power and cooling, staff salaries, maintenance contracts, disaster recovery, insurance, facilities management
A physical server that costs $5,000 to purchase often carries a 3-year total cost of $15,000–$25,000.
Calculating Your On-Premises TCO
Step 1: Hardware Costs
Use straight-line depreciation over 5 years for owned hardware, or annual lease cost for leased equipment.
Step 2: Data Centre Costs
Typical Singapore colocation costs: SGD $800–$1,500 per rack unit per month. Include power, cooling, and remote hands.
Step 3: Staff Costs
Rule of thumb: 1 full-time infrastructure engineer per 100 servers. Fully loaded cost in Singapore: SGD $80,000–$150,000/year.
Step 4: Disaster Recovery
Most organisations maintain a secondary DR site at 30–50% of primary site cost. Cloud DR is dramatically cheaper.
Real Example: 80-Server Singapore Environment
| Item | On-Premises Annual | Cloud Annual |
|---|---|---|
| Compute/Hardware | SGD $200,000 | SGD $360,000 |
| Data Centre / Hosting | SGD $480,000 | SGD $0 |
| Staff | SGD $360,000 | SGD $280,000 |
| DR Site | SGD $200,000 | SGD $60,000 |
| Software & Licences | SGD $120,000 | SGD $48,000 |
| Total Annual TCO | SGD $1,360,000 | SGD $748,000 |
Annual saving: SGD $612,000. Break-even: under 6 months.
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