Microsoft has never focused on building solutions or services—it has always just built platforms. A platform, while sounding grandiose and flexible, is really a breeding ground for interconnected and expensive dependencies. 

SharePoint requirements epitomise this through a whole host of dependent software that must be installed, configured, operated, and (most importantly) paid for.

The not-so-free-after-all version

Let’s start with the “free” version of SharePoint (SharePoint Foundations) that Microsoft often touts as a starting point. First, it isn’tfree. It’s a benefit of Windows Server Client Access Licenses (CAL, per-user licensing), so you need to purchase a Windows Server license and a per-user license for each of your employees. How is that free? The installer is a simple click-through and installs all the necessary components quietly on one machine.

If this all sounds fine to you, you should know that if you want to scale out that installation you cannot just build on it, you have to start from scratch with a new instance of the fully-blown SharePoint Server. Ouch. So again, you need a copy of Windows Server, then an installation of SharePoint Server over that one. But wait, there’s more: this version of SharePoint Server stores all its data in SQL Server, so you’ll need that too.

Let’s talk prerequisites

However, a basic installation of each of these Microsoft products is not sufficient. Each needs to have additional components installed and configured. Here’s the painstaking list of additional prerequisites: Web Server (IIS) role, Application Server role, Microsoft .NET Framework version 3.5 SP1, Microsoft Sync Framework Runtime v1.0 (x64), Microsoft Filter Pack 2.0, Microsoft Chart Controls for the Microsoft .NET Framework 3.5, Windows PowerShell 2.0, SQL Server 2008 Native Client, Microsoft SQL Server 2008 Analysis Services ADOMD.NET, ADO.NET Data Services Update for .NET Framework 3.5 SP1, a hotfix for the .NET Framework 3.5 SP1 that provides a method to support token authentication without transport security or message encryption in WCF, Windows Identity Foundation (WIF), Microsoft SQL Server 2008 R2 Reporting Services Add-in for Microsoft SharePointTechnologies 2010 (SSRS), Microsoft Server Speech Platform, as well as any language packs you want your users to have access to.

Do remember, this is for each server running SharePoint; for large enterprises, this could be tens of servers. These are just theinstallation prerequisites. There are other requirements such as having Active Directory domain controllers for directory synchronization and VPN servers for external access for all your home workers, field sales team, and contractors.

But wait, there’s more…

Even after all the software, there is still the hardware to consider. Each server needs to either be a physical piece of tin (4-8 core minimum) with 8-16GB RAM, or needs to sit on a very high-end virtualization platform given the high I/O nature of SharePoint.

Even when looking at the end-user, SharePoint really needs Microsoft Office to achieve its potential. Even then, it’s important to mention that not all versions of Office will work—you will need the Professional Plus version, which is only available via Volume Licensing. Furthermore, Internet Explorer and Silverlight are highly recommended by Microsoft to get the full “experience”.

Anyone with an Enterprise Architect or similar background will no doubt understand why all this complexity exists—enterprise solutions are complicated! The question to ask though is why? Why should enterprises be managing these risky, complicated and expensive deployments? Why should you be taking all this time to turning the lights on and keeping them on, rather than delivering true business value back to your business? Why be hamstrung by the interdependencies every time there is a product update, licensing change, or major shift in your customers’ expectations?

Platforms were great in the days of legacy, on-premise software, when it was important that proprietary software augmented each other and helped companies leverage their investment in technology incrementally.

Modern enterprises must be flexible and able to deploy low-risk, innovative services that their users will love and adopt. Just as importantly, modern IT services must free internal IT departments from the constant monitoring and maintenance that legacy solutions require. As IT shifts from being a cost center toward a vital business enabler, cloud computing provides the freedom required to give your users the solutions they need without complicated and expensive prerequisites.

SharePoint Total Cost of Ownership

SharePoint is one of those enterprise technologies that lives in many guises, in many companies, small and large, around the globe. This is predominantly due to its viral, “freemium” nature, inclusion in Enterprise Agreements, and close integration to Microsoft’s own Office suite.

One huge issue with SharePoint though is trying to ascertain the Total Cost of Ownership (TCO). Understanding SharePoint TCO is also becoming increasingly important as companies try to determine whether cloud services are a viable alternative to legacy, on-premise deployments.

A few months back, I wrote the Effective collaboration in your businesswhite paperthat details a rough overview of SharePoint’s TCO, but we’ve had a few requests for a more granular breakdown. As with anything on-premise, especially involving Microsoft’s licensing, this is not for the faint of heart—however, stick with me and hopefully we can break the vast majority of costs down.

Firstly, let’s get what we’re not covering out of the way. We will not be including any cost savings that arise from virtualization—either software or hardware. There are too many permutations, as it’ll depend on your hypervisor and Microsoft licensing scheme. Secondly, we are only considering standard SharePoint (not Enterprise CALs, FIS or FAST servers). Finally, we’re looking at data center costs as they relate to power consumption and cooling only, because these are easy quantities to identify. While virtualization has the potential to decrease your costs somewhat, the latter two could greatly increase your overall TCO. I’ll leave this to you to calculate into your costs.

Software licensing—fun stuff, I know…

To keep things as simple as possible, we’ll make a few assumptions:

  1. You procured SharePoint as part of an Enterprise Agreement
  2. You purchased SQL Server using the per processor/core model
  3. You are using the complete Microsoft stack of solutions: Forefront for SharePoint (for anti-virus) and Unified Access Gateway (for publishing SharePoint outside your firewall).

Admittedly, this is a little unrealistic but it does give us a good baseline to work with.

Internal user software licensing cost = Number of Internal Users* (cost of the Microsoft Core CAL Suite + cost of UAG CAL + cost of anti-virus) + (cost of SQL Server per proc * number of SQL procs) + cost of Windows Server * number of SharePoint Servers and number of SQL Servers) + (cost of SharePoint Server * number of SharePoint Servers) + (cost of backup solution * number of SharePoint servers).

Now, you also need to factor in the cost of external users. External users cannot be covered by an Enterprise Agreement’s Core CAL, therefore we need to break it down into component parts:

External user software licensing cost = Number of External Users * (cost of Windows Server CAL + cost of SharePoint CAL + cost of UAG CAL).

With me so far? There’s a further complication with all of this, as some of this cost would count as capital expenditure, while others would count as operational expenditure. To enable parity with cloud services that include the price of service updates in the total cost, we should include Microsoft’s Software Assurance (maintenance) cost. This is already included within an Enterprise Agreement, but you’ll need to know how much of your overall licensing cost is for SA vs. the capital licensing cost—typically 30% over 3 years. Additionally, licensing such as the anti-virus solution is a subscription cost and should be calculated as an operating expenditure (OPEX).

The hard truth about hardware cost

Next up, we have hardware costs. Again, estimating these costs can be incredibly tricky, but the approach I took was to use the HP SharePoint Sizer. The HP model does a lot of the grunt work to ascertain hardware requirements based upon a particular or typical user load. Be aware, it defaults to the more expensive blade option and tends to bias a Storage Area Network-based solution over directly-attached storage and other options that may artificially inflate your (already high) costs.

Other hardware to consider: the external access appliance and WAN optimization between sites if you have a particularly large deployment. And finally, power consumption and cooling needs to be calculated. This can be done by multiplying your server wattage by your kW/h price for the entire year.

Power cost = (Number of servers * Server wattage * 24 * 365 * kW/H cost) / 1000

You are dividing by 1000 to account for the kilowatt cost. As a general rule for cooling costs, you can simply double your power cost.

Now for the big one—people cost

Running software is no different to the TCO of many operations; people come in as the largest cost by far. SharePoint administration is a non-trivial exercise and often requires specialized training, and in many instances, a dedicated (or multiple-dedicated) operational staff. SharePoint touches many points in an IT business—the network, security, databases and desktop—so the number of support staff can quickly escalate. Add in help desk staff to support external users who have forgotten their password and content managers to maintain and secure the individual team sites and even a modest installation can have several people spending an inordinate amount of time running your SharePoint environment.

Therefore, to calculate your cost, look at the average full-burden salary of a SharePoint administrator—currently about $92k in the UK and $102k in the US.

The vast majority of SharePoint installations do not happen without some initial consultancy from a Microsoft partner. For purposes of simplicity, I am thinking more of the architecture and setup of the environment, not a full branding and customization exercise. Anything more than a basic consultancy will add considerably more to your costs. Let’s look at how much it will cost you in terms of people.

People cost = (Number of SharePoint and IT admins + Number of knowledge managers) * Average fully-burden salary + Initial SharePoint consultancy

So, we now have software, hardware, people, and risk all accounted for. People (apart from the consultancy) and maintenance on the software licenses will count towards OPEX with the remainder as capital expenditure (CAPEX). Multiply your OPEX by three (the typical length of an EA), add your CAPEX and you have your SharePoint TCO.


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