The Real ROI of SMB Cloud vs. SMB NAS

Small businesses can range in size from a few employees to a few hundred and the IT needs of these organizations are similarly varied. As they climb their way up from “small” and into “medium” those IT needs evolve, one of which is the ability to collaborate among their growing number of employees. To solve this problem SMB IT managers must make the often confusing choice between using cloud storage and buying a network attached storage (NAS) system.

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The SMB Need

The growing SMB has a few important IT requirements. First, since most businesses start as a collection of laptops, there’s an immediate need for computer backup. Second, as the number of employees increases there is a need to share information and collaborate on data. Finally, as the business continues to grow they need more than just a NAS, the growing SMB often needs a server to run business applications.

The SMB Cloud and more advanced small business servers like Western Digital’s WD Sentinel DS6100 can meet these requirements. But which is the best choice? There are two points of consideration; the cost of and capabilities of each solution.

SMB Cloud vs. SMB NAS – The Cost Comparison

Storing data in the cloud has plenty of initial appeal, the upfront costs are nominal and there is typically no equipment to buy. There are performance challenges when first getting data into the cloud, especially for backups, but it’s the ongoing cost that can become the real problem.

For example Google Drive, a popular destination for SMBs, costs $10 per month for 1TB (based on current pricing, a 500GB plan is the same price as a 1TB plan) of storage for each user, that’s $120 per year, per employee. For a five-employee company that’s a $600 per year cost for a fully managed service that provides adequate file storage and collaboration. However, at 25 employees the cost rises to $3,000 per year, about the same price as a fully equipped NAS.

It is important to note though that the NAS is a one time purchase, plus a little for expenses. Looking at a three year cost of the two options, the cloud-only solution climbs to $9,000 but the SMB’s NAS remains $3,000 plus a small fee for power and operational expenses. For this type of product it would be a surprise if those costs were more than 10% of the cloud, during that 3 year timeframe. This brings the total cost of ownership (TCO) of the NAS solution to less than $3500.

Collaboration and Data Protection

It is also important to note that Google Drive, Dropbox and other popular services are cloud sharing solutions only, meaning they take care of the collaboration requirement. They do not provide complete data protection, which for local computers needs to include the system state. Using one of these services as a backup tool would require the IT administrator to recover the laptop and reload applications before they could recover the data stored on the shared cloud drive.

In order to protect those laptops – the computers that probably started the company and still contain business critical data – the SMB would need a cloud backup service. These solutions can be as much as $1,100 per year per TB. Let’s assume that our example 25-person company was only using 30% of the 1TB that they bought for each employee (another waste of money) that would mean they have 8TB of data to protect at a cost of almost $9,000 per year. So, in order to meet requirements one and two (backup and collaboration) the total cost to the SMB would be almost $12,000 per year, over $35,000 for three years.

By comparison a small business server like the DS6100 provides built-in backup, including system state, plus collaboration for that same $3,000 at nearly the same operational expense. This kind of NAS solution would not need to provide the same capacity as the cloud offering since the capacity would be shared across users and not allocated (and charged for) up front for each user.

The cloud storage option appeals to a small organization because the initial cost is far lower than a NAS would be. But as the organization grows the cost of dozens of employees using the cloud service plus the increased need for backup breaks the economics of the cloud. As businesses approach the half-way point to 25 users (a dozen users) they should seriously consider bringing all or at least part of the file sharing and backup services in house.

The Third Requirement – More than a NAS

The third requirement mentioned above, a server to run applications, often presents itself at this dozen-employee point of growth. Many organizations are running a specific application for the business, often legacy software that the company was started on or an industry-specific application that may be running on a PC. As these companies grow, they’re looking to upgrade their IT systems and need a real server to host these local applications. A good example would be a Filemaker Pro or Access database that started out as an ad-hoc solution to track business data but now needs to be run in more of a server mode. These applications that can easily move from single user to multi-user are very common in small businesses.

Again, some of these offerings may be provided by a cloud service but the same ongoing costs to run that application in the cloud apply, as they did for backup and file sharing. A key differentiator for new NAS solutions is that they now come with enough horsepower to not only provide the file sharing function but also support specific software applications, provide a domain controller or even host virtual machines. In other words the SMB’s NAS purchase could fulfill their first server purchase as well.

SMB Cloud vs. SMB NAS – The Feature Comparison

A complete feature-by-feature comparison between SMB Cloud and SMB NAS is beyond the scope of this report. At a high level the traditional NAS solutions that have been available to SMBs haven’t had the capabilities that cloud-based services do. Cloud storage services typically provide better file, sync and share capabilities, but companies like Western Digital are quickly closing that gap with feature rich small business server solutions that provide file sharing, file collaboration via the cloud, as well as comprehensive data protection that include replication to the cloud. The key difference is that with a small business server the move to the cloud can be done as the need arises. This incremental approach to the cloud lowers cost and avoids any cloud related compromises to security and performance loss. Finally, these server-class NAS solutions provide the ability to run additional server applications as the SMB grows.

Conclusion

The choice between using a cloud storage service and a NAS solution is more than a simple cost comparison. The complete capabilities of each need to be taken into account to see if either are able to meet all of three requirements of the growing business. Both have compelling capabilities from a feature perspective, but the new small business server NAS solutions are surprisingly less expensive as the business scales and as total cost of ownership is considered over the lifetime of the NAS solution.

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Western Digital is a client of Storage Switzerland

Twelve years ago George Crump founded Storage Switzerland with one simple goal; to educate IT professionals about all aspects of data center storage. He is the primary contributor to Storage Switzerland and is a heavily sought after public speaker. With over 25 years of experience designing storage solutions for data centers across the US, he has seen the birth of such technologies as RAID, NAS and SAN, Virtualization, Cloud and Enterprise Flash. Prior to founding Storage Switzerland he was CTO at one of the nation's largest storage integrators where he was in charge of technology testing, integration and product selection.

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