The real cost of IT for a new firm: a comparative analysis
Upfront infrastructure and costs
Recently, our team received a call from Matt, an experienced lawyer currently working at one of the major firms. Matt has been developing plans to start his own practice with four associates, and intends to hire a junior lawyer and one support person. He was looking for guidance on the IT side of his business plan, so we met to talk through the IT infrastructure and associated outlay he’ll need to get his team up and running smoothly with minimal upfront cost and downtime.
Matt’s enquiry is not at all unusual. We get approached with questions like this regularly, from lawyers looking to go out on their own, and wanting the most efficient and future-proof IT pathway. There’s a wealth of information online about cloud versus on-premises IT, and you can easily spend hours trawling through all the pros and cons.
But one thing that isn’t readily available is a cost comparison in a New Zealand context for firms looking to keep their client data in the country, as is the case for the law firms we work with daily. Data sovereignty remains a critical consideration for New Zealand legal practices.
Taking Matt’s team of seven, let’s look at the upfront and ongoing costs for the cloud model versus the on-premises infrastructure model for his IT requirements.
There are a few essentials he needs to hit the ground running. As a minimum, he’ll need seven computers, somewhere secure to store his client data (preferably within New Zealand), up-to-date practice management and billing software, operating software like Microsoft 365, email capabilities, a high-speed internet connection with security measures, and network equipment to connect everything together.
On-premises model
| PCs or laptops (per unit) | $2,200 – $3,500 (x7 units), 3-4 year lifecycle |
| Physical Server | $45,000, 4-5 year lifecycle |
| Practice Management Software | $40,000 – $75,000 |
| Microsoft licensing (per user) | $1,800 (x7 licences), annual subscription model |
| Network security and infrastructure | $8,000 – $12,000 |
| Support hours (build/setup) | $15,000 |
| Total | $135,000 – $175,000 |
Based on the hardware’s average lifecycle, the firm faces replacing computers every 3-4 years and servers every 4-5 years, representing significant future capital expenditure.
Cloud model
| Workstations (per unit) | $1,500 – $2,200 (x7 units), 5-6 year lifecycle |
| Practice Management Software | $40,000 – $75,000, includes implementation |
| Network security and infrastructure | $6,000 – $8,000 |
| Support hours (initial build/setup) | $8,000 |
| Total | $65,000 – $106,000 |
The biggest difference is eliminating the need for an expensive server, which is replaced by cloud infrastructure. Workstation hardware costs less, and there are no upfront costs for Windows software or server infrastructure, which are included in the monthly service fee. Modern workstations have longer lifecycles, and many providers offer financing options to spread initial costs.
Ongoing operational costs
Looking at the upfront numbers makes the cloud option appear straightforward. However, examining the ongoing costs reveals additional considerations.
On-premises model
| Internet and connectivity | $350/month |
| IT support, infrastructure, maintenance, backups | $800 – $1,500/month, increases as hardware ages |
| Microsoft 365 subscriptions | $1,050/month (7 users) |
| Printing and document management | $450 – $700/month |
| Total | $2,650 – $3,600/month |
