Chapter 8

Cost & Operations Model

CapEx vs OpEx, managed vs DIY ops burden.

Learning objectives

Build a monthly cost model for hybrid infrastructure
Separate CapEx, OpEx, and hidden costs (time, outages)
Compare keep-on-prem vs migrate-to-VPS decisions with numbers

Total cost of ownership

Cloud bills are not just the invoice from Swift Host. Workshop Co. tracks:

Category	On-prem Proxmox	Hosted VPS
CapEx	Server $4,000 amortized / 5 yr	Usually $0 hardware
OpEx	Power ~$40/mo, ISP business $100/mo	VPS $35/mo, bandwidth included
Labor	Marcus 8 hr/mo @ internal rate	Maybe 4 hr/mo if provider manages hardware
Risk cost	Downtime if basement flood	Provider SLA credits

Worked example — monthly spreadsheet

Marcus builds a simple model (CAD):

Workshop Co. — May 2026 monthly IT spend

On-prem (allocated)
  Hardware amortization     $67   (4000/60 months)
  Power + cooling           $40
  Business fibre (50%)      $50   (shared with office)
  Subtotal on-prem          $157

Canadian cloud
  Swift Host DR VPS         $32
  Swift Host backup storage $8
  Subtotal cloud            $40

SaaS (not infra but related)
  Google Workspace (3 users) $24
  Calendly                  $15
  Mailchimp                 $20

Labor (opportunity cost)
  Marcus admin 6 hr × $50   $300   (often omitted — dangerous)

TOTAL (with labor)          $556
TOTAL (vendor only)         $256

Include labor

Basement hardware looks cheap until Saturday emergency rebuilds count. Compare VPS not only on $35/month but on Marcus hours saved.

Ops model: who does what

Task	On-prem Marcus	Swift Host VPS	SaaS
Hardware failure	Replace drive, restore backup	Provider replaces node	N/A
OS patches	Marcus	Marcus	Vendor
App deploys	Marcus/Dana	Marcus/Dana	Vendor or API
Monitoring	Uptime Kuma self-hosted	Same + provider network monitor	Vendor status page

Break-even intuition

Moving primary production fully to two VPS instances (~$80/mo) + managed DB add-on (~$40) = $120/mo cloud vs ~$157 on-prem vendor costs — close on cash, but on-prem labor and flood risk tilt hybrid DR toward "keep primary local, replicate to Montreal" for Workshop Co.'s size.

Try it yourself

Build a 12-month budget: current hybrid vs "all production on dedicated Montreal server ($149/mo)." Include one weekend outage cost estimate ($500 lost bookings) if basement power fails without DR.

Sample comparison

Hybrid current: ~$256 vendor + risk of rare $500 outage
Dedicated Montreal: ~$149×12 = $1,788/yr + migration project + lower physical risk
Decision depends on outage probability Marcus assigns — if >1 major outage/2 yr, cloud primary wins

Check your understanding

Is VPS monthly fee the full cost of IaaS?
What is a hidden cost of SaaS Calendly vs self-hosted booking?

Answers

No — add backup storage, IP failovers, egress bandwidth, and admin time.
Less customization, vendor lock-in, US data processing — traded for zero server maintenance.