LIMS Total Cost of Ownership: Cloud Hosting versus On-Premises

Is on-prem the way to go, or will the cloud really save money and make your life easier? If you’re looking at implementing a LIMS, cost is a primary issue. Understanding the Total Cost of Ownership (TCO) and how to host your LIMS are questions you need to answer.

We all know that the cloud can make our lives simpler. It does incredible things like storing our family photos, automatically backing up our smartphone data, and providing a convenient place to stash documents for collaboration across organizational boundaries.

And organizations have come to learn that outsourcing IT infrastructure makes life easier.

You know your company performs best when you concentrate on your core strengths, not building out secondary or tertiary infrastructure. Rather than focusing on funding data centers, computing hardware, and physical security, your business should do what it does best. In laboratories, you need to spend less time on IT concerns and more time improving – say – the quality of testing or efficiency of throughput. In an R&D lab, you need to innovate, rather than manage infrastructure.

LIMS: Is the Cloud Cost-Effective?

But how can you calculate the total cost of ownership (TCO) for using a cloud-based LIMS host compared to hosting a LIMS system at your local premises? (This is typically referred to as on-premises, or on-prem.)

Well, you might be interested in this piece of data!

We recently completed an TCO analysis of our LabVantage Cloud Hosting offering against an on-prem scenario. We do recognize that the specifics of local costs will always be different for every customer, but this analysis can provide a solid baseline for you.

Analyzing On-Prem Costs

Self-hosting costs – particularly when using dedicated hardware rather than virtual systems – roughly break down into the following categories:

  • availability requirements
  • datacenter
  • servers
  • software
  • system refresh cycle (or amortization of hardware)
  • staffing costs.

Let’s take one at a time. We’ll discuss each of these as it pertains to an on-prem system.

  • Availability Requirements

I’ll cover availability requirements first because it does add a cost factor in some of the other categories.

As a first step, a business must determine the minimal guaranteed uptime of the system. For example, does the system need to be available 98% of the time or 99.9% of the time?

It may not sound like much of a difference, but believe it or not, it can be huge. The difference between these uptimes can add considerable cost to the required infrastructure of a system. And rightly so, because what looks like a small difference can significantly change how much lab work gets completed!

Let’s check out some math:

LIMS uptime calculation

The questions your organization needs to ask are:

  • How much of my lab work is executed on this system?
  • What are the business and commercial costs associated with the excessive downtime?
  • Can that cost be measured in lost revenue?
  • Can it jeopardize customer relationships?
  • Can the additional unavailability affect patient safety?

We’ll see how increasing availability requirements can impact on-prem costs later on.

  • Data Center

Calculating the cost of a fully-equipped data center is tricky. In fact, unless you already have access to actual historic costs within your own data center, calculating this in advance can be extremely difficult.

Here are a few of the things you need to consider when calculating data center costs:

  • Square footage requirements (must be sufficient for the physical servers as well as additional working space to access and maintain them)
  • Networking hardware for data and communications (firewalls, routers, switches, cables, etc.)
  • Internet service from a local provider
  • Heating and Air Conditioning
  • Fire suppression
  • Environmental monitoring with an active alert system
  • Electricity with battery backups or a generator during outages and fluctuations

While these costs differ for every hosting situation, we calculated that a two-tier LIMS system with 99.9% availability (extra servers for redundancy and disaster recovery) will cost as much as $6,700 in the first year and about $3,700 every year after.

  • Servers

Let’s assume we have a two-tier LIMS system (for example, a database and application server). An organization would require four servers to make sure the system meets the 99.9% availability target.

Taking into consideration the current price of high-performance SAN storage and enterprise quality servers, an organization could easily spend $46,000 in server hardware.

Of course, this cost could be reduced to using only two servers if your goal was a 98% uptime and a commitment that IT resources could respond promptly to outages.

  • Software

The cost of software – even before the LIMS software has been purchased – is going to come from several sources. Every server will require some foundational software: an operating system, virus scanning, for example.

In addition, there will be software costs associated with creating and restoring backups, managing the network infrastructure (for example, firewalls and routers), and more.

  • System Refresh Cycle

Although the above categories cover many of the initial costs associated with computer hardware, having a reasonable system refresh cycle is important. In other words, how long can existing hardware be used before it must be replaced?

For enterprise systems, the rule of thumb is to replace computer hardware every three years.

On the surface, this may seem like a very short time – especially when the cost of enterprise hardware is so high. But remember, most manufacturers typically provide only a 3-year warranty – meaning any repairs needed beyond the three-year mark will be expensive, negating any savings by extending equipment lifecycles beyond their warranty periods.

  • Staffing

Ah, staffing costs. Well, you can guess the first point about staffing: hiring adequately educated and experienced staff is not cheap.

According to the US Bureau of Labor Statistics, the annual salary for a System Administrator is $87,000 per year. Add another $71,635 of annual company-paid benefits, and the annual cost of a System Administrator to an organization is around $158,635, or about $76/hour.

So how does that System Administrator spend those hours with an on-prem system? Here’s a list of their potential tasks:

  • During the first year, they’ll do setup, networking, and configuration of the servers, installation of all software, some maintenance of hardware and software, configure backups, do disaster recovery tests, troubleshooting, and more.
  • In subsequent years, it’s preventative maintenance, responding to service outages and disasters, general troubleshooting, threat response, and more.

LabVantage estimates that a two-tier, 99.9% available production system generates about $80,000 in cost for the first year and about $6,104 every year following.

LV AWS network
LV cloud versus on prem

Analyzing LabVantage Cloud Hosting Costs

Compared to the cost of an on-prem system, the ongoing cost of a LabVantage Cloud Hosted system is quite simple to calculate. LabVantage Cloud Hosting consists of:

  • Subscription to a LabVantage Advanced Hosted System (one of several available options!), including AWS virtualized servers on the application tier for load balancing and failover, and an AWS Relational Database Service (RDS) plus a failover database, thus meeting the required 99.9% availability.
  • Purchase of LabVantage Installation Services to install your LIMS application.

That’s it!

Aside from a few troubleshooting and tuning tasks that may be required by your on-site IT staff, every aspect of cloud hosting is captured in one of the two items, above.

Additionally, LabVantage has a robust Managed Services offering that can take care of all your maintenance and troubleshooting needs, even executing general system administration tasks in your LabVantage system. (For more information on Managed Services, check out this post).

When these services are applied to a Cloud Hosting subscription, your lab can focus entirely on what you do best. Our experts will care for your system.

How Does the TCO Compare?

If we consider that most LIMS systems will be around for at least seven years, and when we average the annual costs of the on-prem system to include system refreshes, LabVantage Cloud Hosting can save your lab as much as 32%!