Riptide Blog

The Cost Of Hosting an Application Locally

Posted by Raquel Galan on June 1, 2015

Cost of Hosting Applications LocallyRiptide Software, an Amazon Solutions Partner, provides best in class programming, design, and implementation services to it’s customers. This article, part one of a three part series, will break down the total cost of ownership of a startup’s large web application into business requirements, growth, and capacity. This article will focus on the cost of hosting the application locally.

Amazon estimates the cost of a hosting a large web application in their cloud services at $1082 per month, or close to $13,000 a year. As a startup hosting that same environment in a local server closet, the cost is around $19,500 a year. Factor in any downtime or many one-time costs associated with normal business practices, and that price increases substantially.

Breakdown of Hosting an Application Locally

Business Requirements

Riptide Software has been developing custom software solutions for Fortune 100 Companies since 1995. Hardware costs, electricity, cooling, and Internet access need to be considered when calculating the total cost of ownership (TCO) of a software application.

Hardware Costs

A server capable of running a stable online application is going to cost roughly $5,000. An additional $7,000 is needed for VMWare, OS, and other software licensing. Throw in an extra $500 for a UPS, and at least an additional $2,000 for the cost of the rack and other related network hardware needed.

Electricity & Backup Power

Typical servers consume 850 watts, or 20.4 kilowatts (kWh) per day, which totals 7,446 kWh per year. According to the US Energy Information Administration, the average kWh cost for commercial use from is 10.63 cents. That means a typical server costs roughly  $792 a year in electricity to operate. The UPS will pull roughly 2.5 kWH a day, or $96 a year.

Server Room Cooling

A portable A/C unit runs about $3,000, while a Ductless Mini Split costs $1,600. A ductless mini split consumes 2.5 kWh per day, roughly $96 a year. The portable A/C unit chimes in at 1.3 kWh per day, or $50 a year in electricity.

Bandwidth Costs

A stable software application is going to require a specific amount of dedicated bandwidth. The average price businesses pay for dedicated bandwidth in the United States each month is $200. If you’re not wanting to suffer through an Internet outage, an additional ISP will be needed, although that is usually a fraction of the cost at $50 per month.

Business Growth

Riptide Software has grown it’s development team extensively for over 20 years. Over time, demands on hardware and networking resources only increase. There is an unwritten “rule of five years” that needs to be incorporated into the TCO. The rule states that a business will need to replace a key server every five years to remain current with technology and available resources. Consider budgeting $1,000 a year (~$85/mo) per server to replace it every five years. Usually software licenses will transfer; however, you should always consult your software vendor for specifics.

Business Capacity

Riptide Software creates software solutions that hold up under the most rigorous demands. The ability of a business to successfully provide services is directly related to the underlying stability and redundancy of their infrastructure. There are steps a business should take to recover in the event of a disaster, however most American businesses are not capable of surviving a sustained business interruption.

Downtime Due To Service Outages

Power failures, equipment failures and local Internet outages are issues that businesses have to deal with when they host services themselves. Service outages happen at the worst possible time, costing businesses time, money, and embarrassment.

Server Maintenance & Infrastructure Upgrades

Adding more hard drive capacity, CPU power, or RAM requires downtime for the server. The installation of new networking equipment may result in the intermittent loss of connectivity for an application as well. Routine compliance audits may also interfere with total application uptime.

Localized Natural Disasters

Most businesses are not equipped to immediately re-route network traffic to a different location in the event of a hurricane, tornado, or other natural event. Businesses are forced to “wait it out” and hope that their local municipalities restore services as soon as possible.

CA Technologies, one of the largest independent software corporations in the world, estimates that large enterprise businesses lose $71,429 in revenue for each hour of downtime.


There are a number of hidden costs in the TCO of a startup’s large web application. Riptide Software has deployed hundreds of successful cloud based software applications mitigating the risks and costs involved with local hosting. As an Amazon Solutions Partner, Riptide Software provides best in class programming, design, and implementation and integration services to it’s customers. Riptide is committed to sustaining the best practices set forth by Amazon Web Services.

To learn more about how Riptide Software can help your business, please contact us today.




Topics: Amazon Web Services, AWS, Bandwidth Costs, Hosting Application, Managed Services, Raspian, TCO, Web Applications

Written by Raquel Galan

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