Evaluating the cost of SharePoint deployments remains one of the most challenging decisions for IT leaders in 2025. Many organizations struggle to compare SharePoint Online with On-Premise solutions, often overlooking critical factors that impact the total investment. While SharePoint Online offers a predictable subscription model, On-Premise deployments provide different control benefits at varying costs. Beyond the obvious licensing fees, both options include significant hidden expenses. For instance, On-Premise installations require substantial server infrastructure and dedicated IT staff, whereas Online solutions might incur unexpected data storage or integration costs.

As companies face increasing pressure to optimize their technology investments, understanding the complete financial picture becomes essential. This comprehensive cost comparison examines everything from licensing structures and infrastructure requirements to long-term scalability and security considerations. By the end, you'll have a clearer understanding of which SharePoint deployment model truly offers the best value for your organization's specific needs.

Licensing and Subscription Costs

The licensing structures for SharePoint platforms differ significantly, directly impacting your organization's budget both initially and over time. Understanding these models is crucial for making informed decisions about which deployment option offers better value.

SharePoint Online: Per-user monthly pricing (Plan 1 vs Plan 2)

SharePoint Online follows a straightforward subscription-based model with per-user monthly pricing. The platform offers two main standalone plans:

• SharePoint Online Plan 1: Priced at $5.00 per user per month, this entry-level option provides core collaboration features including document management, task management, and basic intranet functionality.
• SharePoint Online Plan 2: Available at $10.00 per user per month, this plan includes everything in Plan 1 plus advanced features such as enterprise search, eDiscovery, compliance tools, and unlimited storage for organizations with five or more users.

Additionally, SharePoint Online comes bundled with various Microsoft 365 subscriptions. The Business Standard plan ($12.50 per user monthly) includes SharePoint alongside desktop Office applications and other productivity tools, making it cost-effective for small to mid-sized businesses requiring a complete solution.

One major financial advantage of SharePoint Online is the predictable monthly expense without substantial upfront investment. Microsoft provides an initial storage pool of 1TB per organization plus 10GB per licensed user, with additional storage available at approximately $0.20 per GB per month.

SharePoint On-Premise: Server + CAL licensing model

SharePoint On-Premise uses a more complex Server/Client Access License (CAL) model requiring multiple components:

1. Server License: Each running instance of SharePoint Server requires a license costing approximately $7,000.
2. Client Access Licenses (CALs): Required for each user or device accessing SharePoint Server.

• Standard CAL: Priced around $180 per license, provides access to core capabilities including sites, collaboration, content management, and basic search.
• Enterprise CAL: Costs approximately $90 per license and adds advanced features like business intelligence tools, Access Services, InfoPath Services, and Power View.

Important to note, Enterprise CALs are additive—users needing enterprise features must have both Standard and Enterprise CALs. For external users accessing SharePoint sites, no CALs are required as the server license covers this scenario.

The total initial investment for an on-premises deployment can range from $20,000 to $50,000 for a mid-sized company with approximately 100 users. This substantial upfront cost contrasts sharply with SharePoint Online's pay-as-you-go approach.

Hidden costs: Add-ons, enterprise CALs, and third-party tools

Beyond the base licensing fees, several hidden costs significantly impact the total investment:

1. Additional infrastructure expenses: On-premises deployments require SQL Server licenses (approximately $3,500+) and hardware/VM setup costs ranging from $5,000 to $20,000
2. Storage overages: While SharePoint Online includes 1TB + 10GB per user, exceeding this allocation incurs charges of about $0.20 per GB monthly. For rapidly growing organizations, these costs accumulate quickly, potentially reaching thousands of dollars annually
3. Premium integrations: Many SharePoint solutions require additional services like Power Automate or Power Apps, which start at $5-$20 per user monthly for premium plans. Premium connectors for external systems add approximately $15 per user monthly
4. Third-party tools: Organizations often need supplementary solutions for forms, reporting, or backup capabilities. Tools like Nintex, ShareGate, or AvePoint typically cost $3,000-$10,000 annually depending on features and user count
5. Customization and training: Custom development work can cost $3,000-$10,000 for a simple SPFx web part, while comprehensive training sessions typically range from $500-$1,500

Before making your decision, carefully evaluate these often-overlooked expenses alongside the base licensing costs to gain an accurate understanding of the true investment required for either SharePoint deployment option.

Infrastructure and Maintenance Expenses

Infrastructure costs represent a substantial portion of the total SharePoint investment, often overlooked when comparing deployment options. Both hardware requirements and ongoing maintenance dramatically impact your long-term budget.

Hardware Requirements: Cloud vs On-site Servers

The infrastructure needs between SharePoint deployments fundamentally differ in their approach to hardware investment. SharePoint Online operates entirely on Microsoft's cloud data centers, eliminating the need for any dedicated onsite hardware. This cloud-based approach instantly removes substantial capital expenses associated with server infrastructure.

Conversely, SharePoint On-Premise demands significant hardware investment. Organizations must purchase dedicated servers and supporting infrastructure. The minimum requirements for SharePoint Server 2019 include:

• Processing power: 64-bit, 4 cores minimum for production environments
• Memory: 16GB RAM minimum for production deployment with all available services
• Storage: 80GB for system drive plus 80-100GB for second drive
• Database requirements: SQL Server that supports database compatibility level 130 (SQL Server 2016, 2017, 2019, or 2022)

Beyond these baseline specifications, Windows Server licensing (2016, 2019, or 2022 Standard/Datacenter) adds another layer of infrastructure expense. The complete hardware investment typically ranges from $5,000 to $20,000 depending on your organization's scale and performance requirements.

IT Staffing Needs: Internal vs Outsourced Support

Maintaining SharePoint environments requires specialized technical expertise, yet the staffing models differ drastically between deployment options. SharePoint Online significantly reduces IT workload as Microsoft manages all infrastructure maintenance, allowing your internal team to focus on strategic tasks rather than routine upkeep.

In contrast, SharePoint On-Premise requires a dedicated IT team for ongoing maintenance, updates, and troubleshooting. This staffing requirement represents one of the largest hidden costs of on-premise deployments. Consider these personnel expenses:

• Internal IT specialist: Approximately $46,000 annually for an IT manager outside London, escalating to $80,000+ when including benefits, National Insurance, pension contributions, and other employment costs
• Annual SharePoint administrator: Around $100,000 per year for a dedicated in-house admin
• Ongoing training: $5,000 to $20,000 annually to keep staff updated on new features

For midsize organizations seeking alternatives, outsourced IT support typically costs $20-$100 per user monthly, making it a cost-effective option for smaller deployments. A hybrid approach with a junior in-house coordinator ($30,000) plus outsourced specialized support often provides the optimal balance between responsiveness and expertise.

Update Management: Manual Patching vs Auto Updates

The update management process presents another stark contrast between deployment models. SharePoint Online features automatic updates and patches implemented by Microsoft without requiring any administrative effort. This seamless approach ensures your environment always runs the latest version with security patches applied promptly.

However, SharePoint Online updates still require monitoring since Microsoft occasionally introduces changes that may impact custom solutions or workflows. Organizations should regularly check the Microsoft 365 Admin center for upcoming changes that might require preparation or testing.

For SharePoint On-Premise, your IT team must manually maintain, test, and apply all updates. This process typically follows one of four approaches:

1. Manual installation of updated versions
2. Automated updates from an on-premises location
3. Configuration Manager deployment
4. Updates from network shares

The manual patching process creates additional overhead, as teams must test compatibility with custom solutions before deploying updates. This careful approach helps prevent unexpected downtime but requires significant staff time and technical expertise.

When calculating the complete infrastructure and maintenance expenses, remember to include these often-overlooked components that significantly impact the total cost of SharePoint ownership.

Customization and Development Costs

Customization capabilities represent a crucial differentiator between SharePoint deployment options, with significant implications for both initial and ongoing costs. The approach to development fundamentally changes depending on whether you choose a cloud or on-premises solution.

Customization Flexibility: Full Trust Code vs Cloud Limitations

SharePoint On-Premise offers nearly unlimited customization potential through full trust code. With complete control over the environment, organizations can implement server-side code that runs directly from SharePoint servers. This flexibility enables deep integration with other systems and allows for extensive modifications to the user interface.

In contrast, SharePoint Online restricts customization options considerably. Microsoft does not permit editing the underlying code that SharePoint Online runs on. The platform primarily supports client-side development using JavaScript, HTML, and CSS. Furthermore, modern SharePoint sites don't allow customizing the site's master page or style sheet, making it impossible to move navigation elements as could be done in classic sites.

For SharePoint Online customization, Microsoft officially recommends using SharePoint Framework (SPFx). As noted by experts, "SPFx is currently the only option to customize modern SharePoint sites where custom script is not allowed". This limitation forces organizations to adapt their customization approach accordingly.

Third-party Integration Costs

The expense of integrating third-party tools and building custom solutions varies considerably between platforms. First-year consulting costs for SharePoint customization typically range from $100,000 to $250,000, often exceeding the licensing costs of alternative solutions. Custom SharePoint development services generally start around $230 per month or approximately $14 per hour.

Both platforms present integration challenges. SharePoint On-Premise allows extensive integration with other systems, particularly on-premises applications. Conversely, certain complex integrations with on-premises systems might be more challenging or unsupported in SharePoint Online. Additionally, workflows developed using older toolkits like SharePoint Designer or Nintex might not function properly when deployed in newer versions.

Impact on Upgrade Cycles and Compatibility

Customizations significantly affect upgrade processes and long-term maintenance costs. Full trust code in SharePoint On-Premise must be thoroughly reevaluated during upgrades to ensure compatibility with newer versions. This comprehensive review process adds substantial time and expense to migration projects.

SharePoint Online automatically updates, eliminating manual patching but creating potential compatibility issues. Custom solutions developed for earlier versions may break after updates. Particularly, applications built on old APIs or using deprecated technologies are vulnerable to failure following updates.

Migration between environments presents additional challenges. Moving customized SharePoint On-Premise solutions to the cloud "can be challenging as it may require redeveloping to adjust to a new environment". Old coding models often aren't supported in newer versions, necessitating code rewrites using modern frameworks like SPFx.

Organizations should carefully weigh these customization constraints against the benefits of each platform when calculating the total cost of SharePoint ownership.

Conclusion

Choosing between SharePoint Online and On-Premise deployments represents a significant financial decision with far-reaching implications for organizations of all sizes. Throughout this comparison, several critical cost factors emerge that directly impact the total investment required for each option. SharePoint Online offers predictable subscription-based pricing with minimal upfront costs, automatic updates, and reduced IT staffing requirements. Additionally, the cloud platform provides built-in scalability through its pay-as-you-go model, eliminating expensive hardware investments. This approach suits organizations seeking operational expenditure rather than capital investment. Conversely, SharePoint On-Premise demands substantial initial outlays for server hardware, SQL licenses, and CALs. Despite these higher upfront costs, organizations gain complete control over their data, unrestricted customization capabilities, and potentially lower long-term expenses for very large deployments. Companies with specialized compliance requirements or legacy integrations might find this control worth the investment.

Before making this crucial decision, organizations should conduct a comprehensive five-year cost analysis encompassing all factors discussed—from licensing and infrastructure to customization, scalability, and compliance requirements. This thorough evaluation ensures your SharePoint investment aligns with both current needs and future organizational growth.