Comparing the Costs of Cloud VMS to On-Premise VMS Solutions
What Is an Operating Expense compared to a Capital Expense? How are they related to a Total Cost of Ownership? A capital expense (CAPEX) is an expense a business incurs to create a benefit in the future and an operating expense (OPEX) is an expense required for the day-to-day functioning of a business. Operating expenses and capital expenses are treated quite differently for accounting and tax purposes. To determine the total cost of ownership (TCO), add the OPEX and the CAPEX. The TCO is the real cost of anything a business might purchase.
When considering the real cost of physical security for a business, in particular video surveillance, it’s important to understand the real total cost of ownership. With major advancements in cloud technologies, there can be significant savings over typical surveillance systems once the CAPEX and OPEX are factored to understand the TCO.
Consider that over 3 to 5 years, the operating expense of a typical video surveillance solution maybe be up to 20% more expensive and capital expense may be up to 40% more expensive than typical on-premise video surveillance systems. Incorporating a cloud camera solution in a small business with one location, the total cost of ownership savings over five years can be 30% or more and for a large business with one hundred locations, the total savings can be 40% or more.
Calculating the cost of ownership
Calculating the total cost of ownership requires taking into consideration many different line items for both solutions, the cloud based and the typical surveillance solution. Some of these line items are obvious and others require more due diligence to determine. Here are some of the items that should be considered. The total cost of ownership of a typical on-premise video surveillance solution includes at least these seven key line items:
1. NVR Server Hardware with VMS Software License and Support Plans
2. IP Cameras
3. Installation Labor, Parts and Accessories
4. NVR and Camera Maintenance and Updates
5. IT Management, Reporting, and Audits
6. Cyber Security and Privacy Management
7. Electricity
The comparison
Also consider that most on-premise video surveillance systems do not include many of the advanced features that are included at no additional line item cost with most cloud-based solutions. These features include items such as redundant video storage, bandwidth management, and automated cyber security and privacy updates.
Analyzing two examples, one for a small business with 2 locations and 8 cameras at each location as well as another with 100 locations and 12 cameras per location, the total cost of ownership for cloud-based solutions offers interesting advantages. For the smaller business the savings were $11,396 or 35% over 5 years and for the larger business with more locations, the savings were $508,400 or 24% over 5 years.
Every video surveillance installation is a bit different and may present unique results. Contact us to get a copy of a tool available for you to create your own TCO comparison. Evaluate the total cost of ownership on your next video surveillance project to see if there are advantages for you with cloud-based video surveillance.