Examine the hidden costs of on-premises hotel software
If I only had a dollar for every time I've heard someone say, "I feel safer with my server right next to me" or "Cloud is so much more expensive than if I buy the software outright."
On the surface, such statements seem to make a case for stiff-arming a move to cloud technology. But dig just a little deeper, and there's plenty of logic, statistics, and common sense that debunk those views.
When making the game-changing decision to embrace cloud as a hotelier, it's important to factor everything into your Total Cost of Ownership (TCO). Don't "phone in" this work; your due diligence is imperative.
But it can be overwhelming, so let's start with the most notable factors that should be considered:
IT hardware:
Take into consideration hardware costs, electrical costs, cooling costs, and periodic "health check-ups" that a server will require. Additionally, don't forget that on-premises software takes up a lot of storage. You don't want to receive a phone notification, indicating that you've run out of disk space.
Hotel software:
This is often a greater expense category than one imagines. Even when hotel software licenses have been purchased, there are typically associated support costs that need to be factored in. Likewise, it'll be necessary to include the expense of add-on software for interfaces.
If you're managing your own back-ups, associated costs need to be in the TCO. Take into account not only the cost of the off-site storage facility that's being used but also the time and effort needed by the IT team to manage the back-ups, especially checking for errors.
On-premises software does not live on an island, which means it will need an operating system and anti-virus software. These pieces are vital; include all costs for OS and anti-virus. Don't forget that mobile devices that are supported need to be included in the TCO as well.
Upgrades, patches, and downtime:
It's a cloud vendor's responsibility to provide compliant and innovative software. But if software is on-premises then it's your responsibility to keep it up to date.
On-premises software often is complex and maintaining it yourself may not be an option. You'll need to include any additional software costs, required vendor services, and the time and effort expended by your team to plan and execute upgrades and patches (including overtime).
IT security:
Breach. It's probably one of the scariest words today for hoteliers and probably the most misunderstood among those who own on-premises software. Most security breaches and data losses that occur are linked to on-premises software (or internally hosted software). The rules for security are getting more complex, and it's becoming increasingly harder to stay secure. Your TCO must include all that it takes to keep your hotel safe, including additional software and safeguards that require implementation. Consequences for not being secure, such as costs of audits and fines, also need to be factored in.
In addition, there are "hidden costs" for on-premises software that must be considered:
- Have you heard of the term "shelfware?" It's basically unused, purchased software that's likely incurring support costs.
- For larger upgrades that might result in significant downtime, other factors may need to be reviewed such as increased operational costs, including additional front-desk staff and managing guest issues.
- Third-party integrations and upgrades can be tricky. It's important to remember that even the slightest change to a server parameter can make the whole thing crash. Therefore, all testing of software needs to be included in the TCO as does any "fall out" resulting from a bad upgrade.
- Costs associated with unanticipated events - such as server parts breaking down, or last-minute fixes that need to be applied by a software vendor, and your own IT labor costs for such occurrences - also need to be added.
Make sure to write it all down. It's an important exercise to help confirm that a move to cloud makes all the sense in the world.
Christine Allen
PR Director
Oracle Hospitality
