IaaS (Infrastructure-as-a-Service) is a cloud service model that essentially involves hosting various IT resources from a data center, often along with your core applications to create a smoother-running and more cost-effective software ecosystem. 2026 will see the ROI of cloud-hosted infrastructure only increase due to technological and market improvements on one side, and economic pressures and operational challenges on the other. For businesses that rely on interconnected (and/or aging) technology stacks powered by single foundational systems like an ERP (Enterprise Resourcing Planning) solution, hosting these disparate components with IaaS will provide incredible opportunities to better manage your total cost of ownership (TCO) and offset growing hardware expenses.
Here are the top reasons why Infrastructure-as-a-Service will become your most cost-effective option for leveraging cloud-based
What Lives in Your Server?
Perhaps one of the biggest hurdles for full-scale organizational cloud migration is the siloed nature of each team’s software usage, which makes it harder to inventory the number of on-premise applications still being used. Marketing might use project management tools hosted on the file server. Sales could be running a commission calculation system. Someone on the manufacturing floor may have added their own solution to track production runs, but never documented it with IT.
These shadow applications make it difficult to both accurately map out what needs to be migrated and recreated, and to truly gauge ROI when servers are being used to retain one or two legacy systems. However, Infrastructure-as-a-Service gives you more flexibility to leverage a hybrid combination of resources. Some workloads transition to the cloud in phases, allowing teams to verify performance and validate costs before committing entire server environments.
Cloud Pricing Becoming More Competitive in 2026
As SaaS and other cloud-based models are becoming more ubiquitous, market dynamics have shifted pricing structures significantly, opened up room for providers to optimize costs and to pass savings onto customers. Here are a few of the trends in cloud hosting that are shifting prices:
- Reduced Transfer Fees: Many hyperscalers have introduced free egress tiers and reduced transfer pricing in response to regulatory pressure, particularly from EU Data Act requirements taking effect in January 2027.
- Economies of Scale: Data center operators buy hardware in bulk, negotiate volume discounts on power contracts, and consolidate storage across hundreds of clients to improve utilization rates. These savings get passed through to customers as more competitive pricing.
- Technology Improvements: More efficient processors reduce power consumption per compute unit. Higher-density storage lowers physical space requirements. Improved virtualization software squeezes more performance from the same hardware, translating into better price-performance ratios year over year.
Predictable Monthly Costs Replace Variable Expenses
Traditional cloud pricing models charge based on usage — similar to an electric bill that fluctuates month to month. Though this offers flexibility for enterprise-scale operations, it creates budgeting challenges for SMBs and midmarket firms. Fixed-fee Infrastructure-as-a-Service provides:
- Consistent monthly billing based on configured system resources rather than consumption patterns
- No surprise charges from traffic spikes, storage overruns, or forgotten test environments
- Simplified financial reporting with stable OpEx expenses rather than lumpy CapEx investments
- Protected pricing against market volatility and supply chain disruptions affecting hardware costs
The Cost of the Server Hardware Refresh Cycle is Rising
Server hardware always needs to be replaced, yet economic factors continue to make this refresh cycle more expensive every few years. Traditional IT infrastructure forces businesses into a continuous replacement cycle roughly every 3 to 10 years. Here is what this typical replacement cycle means for cost planning:
- Initial Investment: A midmarket company with 10 servers faces approximately $50,000-$80,000 in initial hardware costs
- First Refresh: Another $50,000-$100,000 for new servers after 3-5 years once performance needs and costs increase
- Ongoing Cycle: Another $80,000-$100,000 for subsequent cycles
- Total Impact: Over 10 years, hardware refresh expenses alone can total $100,000-$300,000 before considering installation, configuration and migration labor costs
Businesses facing server upgrades in 2026, however, also have to confront extended lead times due to component shortages, tariff uncertainties and supply chain constraints. These delays stretch hardware refresh projects from weeks to months, forcing businesses to limp along on aging infrastructure while waiting for new equipment. IaaS allows you to sidestep these procurement bottlenecks entirely, with no waiting for vendor quotes, no negotiating with multiple suppliers and no coordinating delivery schedules across multiple locations.
Legacy Security Liability
Many businesses may attempt to extend equipment lifespan to delay replacement costs. This creates mounting security vulnerabilities such as:
- Software vendors stop supporting older operating systems and platforms
- Security patches become unavailable for end-of-life equipment
- IT teams struggle with constant maintenance and emergency fixes
- Compliance requirements become harder to meet with outdated systems
Small and Mid-Sized Businesses Win with IaaS
Infrastructure-as-a-Service probably sounds like a technological overhaul only available to enterprises – in reality, IaaS often works best for many SMBs that have hit the sweet spot of server workload demands. The most common break-even point occurs at less than 15 servers with predictable performance requirements, while those with less than five see the biggest advantage. For example, a small manufacturer running Sage 100 on two servers could spend tens of thousands of dollars in upfront hardware costs even before considering SQL Server licensing, Windows Server licenses and backup infrastructure.
Reclaiming Space and Cutting Overhead
On-premise servers consume also other resources beyond their purchase price:
- Office real estate currently dedicated to server closets or equipment rooms can be repurposed for revenue-generating activities
- Power consumption drops dramatically when eliminating servers that run continuously, along with their required cooling systems
- Climate control costs disappear when server rooms are no longer needed
- Equipment insurance and physical security expenses reduce without on-premise hardware to protect
A typical 5-server environment consumes roughly 3,500-7,000 kWh annually for power and cooling. At average commercial electricity rates, this represents $350-$700 in ongoing monthly overhead.
IT Staff Investment
On-premise infrastructure requires dedicated resources for hardware management, OS patching, backup verification and disaster recovery testing. For smaller businesses, this means hiring a full-time, onsite IT department that will have to devote significant amounts of time to server maintenance processes that will also eat up time otherwise needed for other support activities. With IaaS, the managed service portion is handled on the provider’s end as they maintain the physical components directly.
Lower Costs for ERP and Business Management Software Stacks
The total cost of ownership of financial reporting software such as ERP can cause sticker shock as the expenses mount, particularly when you get a big picture view of how many integrations may be required to create a true business management technology stack. Enterprise accounting systems rarely run in isolation, requiring connection to be able to automate the financial reporting from all sides of your business, among other processes.
Infrastructure Requirements Scale with Integration
A basic Sage 100 implementation might run adequately on a single server with 16GB RAM, before you start incorporating other solutions. Add DocLink for document management, Starship for shipping and ScanForce for warehouse operations – suddenly the environment needs multiple servers, additional SQL Server licenses and more storage capacity. Each component increases on-premise TCO through both direct costs (hardware, licenses) and indirect costs (management overhead, backup windows, patch coordination).
Hosted infrastructure absorbs this complexity more efficiently. Adding more applications requires provisioning additional virtual resources rather than procuring, installing and configuring physical hardware. Storage scales incrementally instead of requiring new SAN purchases. SQL Server licensing gets managed by the provider rather than requiring separate procurement and compliance tracking for each database instance.
Learn More About IaaS Hosting with SWK Technologies
Cloud migration can bring multiple advantages for managing the total cost overhead of your technology, but determining if it right move for your business means taking a true accounting of what you need for ROI. SWK Technologies provides IT infrastructure and application hosting for ERP and other business management software, leveraging decades of experience with software to tailor our customers’ environments to their needs and goals – get in touch with our team today to see if IaaS is right for you.
Contact SWK here and learn more about Infrastructure-as-a-Service to discover the cost benefits for your business technology migration.