The hidden costs of on-premises technology

Matt Lynch, CTO
April 25, 2024

Key Takeaways:

  • While on-prem technology has been the longstanding choice for senior living communities, there are substantial upfront and hidden costs as compared to cloud technology.
  • On-premises technology incurs significant upfront expenses for hardware, software licenses, and infrastructure, plus costs for maintenance and security. On-prem tech is limited when it comes to scalability. Maintenance and troubleshooting can also take away precious time from staff.
  • Cloud technology saves upfront costs, maintenance, and time. Cloud solutions are kept up-to-date by the provider, are scalable, and have little downtime, making it the modern choice for tech-savvy senior living communities.

Adopting new technology is essential to keep your senior living community running smoothly in our modern age. Often, the focus falls on what the technology does, whether that’s caregiving tracking, staff scheduling, nurse call, fall detection, or EHR systems. However, how the physical technology is installed and runs can be just as important.

Choosing between on-premises and cloud-based solutions can significantly impact your bottom line and ease of use. While on-prem tech has been the traditional choice for years, it has drawbacks in terms of cost—not only upfront investment, but surprising costs that arise from maintenance, limits to scalability, and more.

Read on to learn more about the hidden costs associated with on-premises technology for senior living communities and why migrating to cloud-based solutions may offer a more cost-effective and sustainable approach.

What is the difference between on-premises technology versus cloud-based solutions?

On-prem technology refers to when computing resources are physically located on site. This could include storage devices, servers, and more, which are located in a dedicated area. On-prem solutions offer complete control over the technology and can be customizable, but require upfront investment as well as ongoing maintenance (more on that below).

Cloud technology is defined as when computing services, such as storage or software, is delivered over the internet. Instead of communities owning and maintaining their hardware and software infrastructure at their facility, cloud users access their services remotely over the internet. As a consumer, you may be familiar with cloud hosting through Amazon Web Services, Google Cloud, Microsoft Azure, Oracle Cloud, and other popular services. As opposed to on-prem tech, cloud tech is more cost effective, scalable, and flexible.

What is the cost of purchase and installation?

On-premises technology: One of the clearest drawbacks of on-premises technology is the significant upfront expense of purchasing hardware, software licenses, and the infrastructure it requires. Typically, organizations are responsible for purchasing, installing, and managing all of the hardware and software required for on-prem solutions. That doesn’t just mean installing servers—on-prem tech requires a dedicated server room with a venting, cooling system, and fire suppression system. Ideally, you’d also have an uninterruptible power supply (UPS). In addition to the investment in hardware, you need to pay for software licenses and infrastructure setup.

One former senior living executive told us that installation for her on-prem solution, a nurse call system with a stationary monitor and pagers to receive alerts, cost between $250,000 and $300,000. After five years, that system needed to be upgraded, which cost her an additional $50,000.

The difference with cloud solutions: Cloud service providers cover the cost of servers maintenance and management—which is something that users of on-prem tech handle themselves. Because there’s far less to set up and no servers to physically install, the implementation costs are much lower. The former senior living executive said that Sage, which is a cloud solution, costs 90% less than legacy systems to install. That cost encompasses the components of our call system that residents and care staff interact with, such as nurse-call buttons and receivers. While there’s a monthly subscription for the Sage service, the total cost was ten times less than her on-prem solution.

What are the costs for maintenance and tech support?

On-premises technology: After on-prem tech is deployed, maintenance and support will become ongoing expenses due to system updates, hardware repairs, and other troubleshooting needs. Having a service team come onsight for repairs and support can be costly. The former senior living executive said she spent close to $1,500 on a service contract every six months, which only included the vendor relationship and did not cover any of the service fees. Therefore, on top of that, she paid a fee for the third-party support team to come out for maintenance needs, which included $150 per hour for their time. Not to mention the fact that her staff (or even the executives like herself) had to take time off to supervise the support team. When it comes time to upgrade, you may be able to make upgrades to your current software but, more likely, you’ll need a hardware replacement.

The difference with cloud solutions: Because the tech is located offsite, the tech makers and the server provider are responsible for larger system maintenance. If something smaller breaks—for example, a nurse call pendant—those pieces of equipment can be replaced as one-offs, but you won’t be dealing with larger systemic meltdowns. With the right tech partner, you’ll also rarely have downtime. Sage, for example, boasts 99.7% uptime, the term for how often our platform is up and running without delays or downtime for updates—meaning you’ll virtually always have access. (The limited amount of downtime has been due to brief issues with power and network connectivity, something which affects both on-prem and cloud-based solutions.)

On-premises technology: If your community grows, will your tech be able to grow alongside it? If not, you could lose out on opportunities for expansion and greater income. On-prem tech may lack the flexibility to scale seamlessly if you add more communities or increase the number of residents you serve. You may need to buy new hardware, expand your server room, and add new functionalities, which can not only be costly but will also disrupt your day-to-day operations.

The difference with cloud solutions: Because you’re tapping into a larger network operated by a provider, there are unlimited computing resources at your disposal. With Sage, for example, if you need more computing power, you are automatically scaled up—with no downtime to do so.

What are the everyday IT costs?

On-premises technology: Having on-prem tech means you either need an IT staff that can troubleshoot issues or your non-technical staff is going to have to take on this work themselves. Many communities ask their maintenance team to handle these needs or will hire a third party service team. At times, your caregiving staff or executives may end up on the phone for hours trying to troubleshoot technical issues, wasting valuable time and extending your staff. And if your tech doesn’t get up and running in time, you’re not only paying staff to try to resolve it, but you’re at risk for noncompliance.

Cloud solutions handle all infrastructure management offsite, so those IT costs are not your problem. Some tech partners, such as Sage, also offer a hands-on customer service team, which are available to help out 24/7 at no additional cost.

What are the security and compliance risks?

On-premises technology: Because you fully own and control the technology with on-prem solutions, your team will also need to handle data security—and make sure that it’s compliant with HIPAA and local regulations. On-prem tech poses unique security challenges because of their physical vulnerabilities. During disasters, you may not be able to recover the tech or its associated data. Addressing data needs and creating backups is an additional investment to consider.

The difference with cloud solutions: Cloud services typically provide automated backups, security measures, and disaster recovery. Sage guarantees that our service is secure and HIPAA compliant. Sage is also SOC 2 compliant, a voluntary standard for securely managing data and following specific confidentiality and privacy guidelines. All electronic PHI is encrypted during transmission and storage and there are robust data backup measures in place.

By transitioning to cloud-based technology solutions, senior living communities can unlock cost savings, enhance operational efficiency, and focus their resources on delivering exceptional care for residents rather than troubleshooting pesky, on-site tech. If you’d like to know more about Sage’s cloud-based technology, sign up for a demo.