How much does a virtual server cost?

A virtual server is a virtual machine running server applications. Virtual server cost is more affordable than that of physical servers from a capital expenditure (CAPEX) standpoint. However, they can be quite expensive in the long run. This article will help you look into the physical server and virtual server cost differences, evaluate some types of servers based on use cases that are out there, understand the difference between owning and renting a server, understand the factors that determine virtual server cost, and learn some cost reduction best practices.

Differences between physical and virtual server costs

Before discussing the costs that go into a virtual server,read on to learn about physical servers and virtual servers.

What is a physical server?

A physical server is a server that occupies physical space in your data center, your office, or a certain section of your premises. You can see and handle it physically. For example, you can transport a physical server from one rack, cabinet, or room to another, or you can assemble/disassemble it.

If you wish to assemble a physical server yourself, you can do so by purchasing various components such as processors, RAM, storage devices, motherboards, power sources, fans and so on. You can also purchase a finished product if you want. But just the same, you’ll be purchasing something tangible. You don’t encounter these experiences with a virtual server.

What costs are associated with a physical server?

Since you’ll be dealing with physical hardware, you’ll need IT staff who are trained to manage and maintain computer hardware. That should be considered when you hire IT staff. You can of course hire a third party, such as a managed service provider (MSP), to take charge of those responsibilities. Still, the cost of a server would include hardware administration and maintenance.

You’ll also need to purchase networking equipment. Moreover, depending on how extensive your server infrastructure is, you may also need to factor in data center floor space, power, and heating, ventilation, and air conditioning (HVAC) costs. If you require high levels of uptime, you’ll also need to spend on redundant equipment. Lastly, if your servers are mission-critical and/or contain sensitive data, you’ll need to spend on security (e.g., security guards, cages, CCTV cameras).

What is a virtual server?

A virtual server, a virtual private server (VPS) in hosting parlance, is a virtual machine functioning as a server. Unlike a physical server that’s made up of hardware, a virtual server is technically software. It runs, usually with other virtual machines, on a piece of software known as a hypervisor. A hypervisor virtualizes the physical infrastructure (CPU, RAM, storage) it’s running on and enables you to run multiple virtual servers on top of it.

Although you can run virtual servers on -premises and on your own physical servers, virtual servers as discussed here are those that are managed by a third party such as a hosting provider or a cloud service provider. Your third-party provider will provide you with the necessary tools for managing your virtual servers remotely.

What costs are associated with a virtual server?

Since you won’t have to deal with any of the physical aspects of your server, your CAPEX costs will go down significantly. You don’t have to purchase physical CPU, RAM, storage, or entire physical servers. There’s no need to spend on networking, cooling, power, security, and so on, either.

Instead, you’ll only have to pay your provider a monthly or annual fee. While your CAPEX costs will go down significantly, it doesn’t mean your costs are completely going away. They’re just transformed to operating expense, or OPEX. More about this later.

different types of servers and how much they cost

This section, classifies different types of physical servers according to their use cases. While there are certainly several types of servers out there, each with different functions, this section focuses on three types and provides their associated costs.

Servers for storage

Storage servers are servers that are primarily used to store files. These files can be documents, spreadsheets, images, videos, and so on. The files can be production files, which are used in day-to-day operations, or backup files, which are simply stored for future retrieval in case something happens to the production files. Since storage servers store files, they’re also often called file servers.

A storage server can cost between $5,000 to $10,000. However, in certain cases, such as when you need to store 3D files and video files, the cost can go as high as $20,000. That’s because these files consume a lot of storage space. Thus, you’ll need to spend more on the extra storage.

Servers for virtual machines

Servers that need to run virtual machines (VMs) will normally also need something called a hypervisor. A hypervisor is a piece of software that virtualizes the underlying hardware (or the underlying OS) and enables you to run virtual machines on top of it. Virtual machines need a lot of storage space, so the physical server itself might cost as much as a storage server ion the upper end of the spectrum. That means around $20,000.

However, the costs don’t end there. You’ll also need to deal with software costs for your hypervisor. While the hypervisor itself might be free, the management interface isn’t. Yes, there are free hypervisor solutions, but the most widely accepted products like Microsoft Hyper-V and VMware ESXi aren’t. Software costs can go as high as $5,000 or even more. So, that’s a total of $25,000. This is for a perpetual license, not a subscription-based license.

Servers for remote desktops

Servers that are supposed to run remote desktops (this includes both virtual desktop infrastructure, or VDI, and RDSH type remote desktops) will need a special type of software. One example is Parallels® RAS. Regarding costs, Parallels RAS follows a concurrent user model. A one year subscription costs $120 per concurrent user for a minimum of 15 users. That amounts to $1,800 per year for a 15-user organization. The details of Parallels RAS will be discussed in more detail later.

Most solutions now use a subscription-based model like the one above. So, in cases like this, your physical server will be following a CAPEX-based model, while the server application running on it will be following an OPEX-based model. If your server were a virtual server, both your server and the application running on it would be following an OPEX-based model.

Renting vs owning a virtual server

Next you’ll learn about the cost differences between renting and owning a server, including. some sample costs for physical and virtual server plans.

Cost of owning a server

Here are three estimate costs of physical servers, along with some specs.

Specs Price
Intel Pentium CPU (G6405T), 8 GB RAM, 1 TB HD storage $750
Intel Xeon CPU (E-2314), 16 GB RAM, 1.92 TB SSD storage $3,500
Intel Xeon CPU (Silver 4309Y), 64GB GB RAM, 1.6 TB SSD storage $6,600

When you choose the hardware components that make up your physical server, you have a lot of flexibility. You can choose a specific processor (e.g., a specific brand and model), specific memory module, and specific storage device (e.g., HD or SSD, along with the specific brand and model). But aside from CPU, RAM, and storage, you’ll still have to spend on other components like the chassis, RAID, embedded systems management, network cards, and so on.

That’s of course just the cost of the physical hardware itself. As mentioned earlier, you’ll still need to spend on other items like cooling, space, security, hardware administration and maintenance, and shipping.

Cost of renting a server

Here are six estimate costs of virtual servers, along with some specs.

       Specs Price
2-Core CPU, 8 GB RAM, 30 GB SSD storage $250/month
4-Core CPU, 16 GB RAM, 1.9 TB SSD storage
8-Core CPU, 64 GB RAM, 1.6 TB SSD storage $530/month

As you can see, the initial cost of a virtual server is much lower than that of a physical server. Although, it is worth noting that the lowest specifie virtual server is only a third the cost of an equivalent physical server. That means, if you don’t consider other factors like cooling, security, space, etc., it will only take three months to recoup the cost of a physical server.

However, for the highest specified servers, it would take over a year to recoup your costs. Again, this does not count the other costs that come with owning a physical server. For virtual servers, the cost that you see above already includes practically everything you need to spend on.

Determining the virtual server costs for business

Virtual server cost can vary depending on certain factors. That includes allocated compute resources, bandwidth, number of IP addresses, and whether you go with a managed or unmanaged VPS.

Allocated compute Rresources

This is the most substantial factor. A large majority of VPS providers base their virtual server pricing on the allocated compute resources (CPU, RAM, storage) for a given virtual server. The higher the specs, the more expensive a virtual server will be. These specs typically include the:

Most VPS offerings come in preconfigured packages such as:

However, some providers also offer customizable offerings where you can create a bespoke VPS set up.


Another factor that determines the price of a virtual server is the bandwidth. This is the amount of traffic your server can transmit measured in bits (b) or bytes (B) per unit time. For example, one plan may support a bandwidth of 250 Mbps(250 million bits/second). Another plan may support 2 Gbps (2 billion bits/second). Other providers measure bandwidth on a per month basis. for example, 1 TB (1 trillion bytes) or 3 TB per month.

Naturally, you’ll want higher bandwidth if you expect your site to receive a high volume of traffic. Most bandwidth specifications are already included in a plan, along with hardware specifications. Some providers measure both inbound and outbound traffic, while others only measure outbound traffic. So, make sure you know what your provider is referring to in its bandwidth specification.

Number of IP addresses

Yet another factor that determines virtual server cost is the number of IP addresses more specifically, the number of dedicated IP addresses. A site that uses a dedicated IP address is generally faster and more secure than a similar site using a shared IP address.

It’s faster because you’re the only one using that IP address. It’s not shared with other organizations. It’s more secure because, unless your server is doing something malicious, there’s very little chance it gets blacklisted (unlike shared IP addresses). Also, it’s easier for you to control access to resources on your network since you can specify the IP address. The more dedicated IP addresses you have, the more expensive your virtual server costs will be.

Managed VPS vs. unmanaged VPS

Last but not least, your virtual server cost can also be determined by your choice between a managed VPS or an unmanaged VPS. An unmanaged VPS or self-managed VPS is basically a virtual server that you manage yourself. This option is ideal if you have the right in-house talent that can administer your virtual servers for you.

On the other hand, if you don’t have anyone in your organization with the technical know-how to manage your virtual servers, you can get a managed VPS subscription. Your vendor will take care of administrative tasks such as server set up, Domain Name System (DNS) set up and configuration, SSL/TLS installation, database installation and configuration, and so on. A managed VPS can cost 10x to 20x times that of an unmanaged or self-managed VPS.

How to reduce expenses for virtual servers

While a virtual server is much cheaper than a physical server from a CAPEX standpoint, virtual server cost can be very expensive in the long run from an OPEX standpoint. Thus, you must exercise prudence in choosing and managing your virtual servers. Here are some tips for reducing your VPS expenses.

Start small and grow as the need arises

As intimated earlier, virtual server cost is primarily dependent on the allocated compute resources, i.e., CPU, RAM, and storage. Thus, the fewer resources you purchase, the less the cost. So, for example, instead of going straight to the highest-level plan, or Plan 3 in the example above, you can just start was simple plan first (provided of course it meets your current demands). Once demand increases, you can then simply upgrade. The Ssame holds true for bandwidth.

Go for an unmanaged VPS if you can

If you really don’t have anyone capable of managing your virtual server(s), you have no choice but to go the managed route. However, if you do have someone who’s capable enough to manage those servers, you can save a lot if that person just takes charge of managing them. Some hosting providers charge for specific administrative services (e.g., server set up, DNS set up, SSL/TLS installation). You can just pay for those services that your in-house IT can’t handle.

Choose server applications that have low total cost of ownership

This best practice won’t reduce the cost of your virtual server subscription per se. However, it will certainly reduce your otal cost of ownership (TCO). By prudently choosing server applications for your virtual server, you can reduce your overall IT costs.

Parallels RAS can empower you to meet your VDI needs at reasonable costs.

Optimize your virtual server costs with Parallels RAS

Parallels RAS is an all-in-one virtual desktop infrastructure (VDI) that allows you to host virtual desktops and applications in a centralized location such as a data center or a public cloud like Amazon Web Services (AWS) or Azure. Once hosted, those applications and desktops can be accessed easily from any endpoint device through the internet.

VDI solutions like Parallels RAS have been skyrocketing in popularity since the beginning of the pandemic which brought about accelerated adoption of remote and hybrid work strategies. VDI provides remote workers with a secure and cost-efficient way of accessing business applications and data from the comfort of their homes or wherever they’re working from.

Being centralized, VDI reduces costs from an OPEX standpoint because the time spent deploying, managing, securing, and maintaining applications and desktops is reduced significantly.

While there are other VDI solutions out there, Parallels RAS is known for its ease of use, simplified architecture, and uncomplicated licensing. All this results in a much lower TCO compared to other VDI solutions ion the market. By using Parallels RAS as your VDI solution and installing it on your virtual server, you can reduce your IT costs significantly.

Parallels RAS is equipped with configuration wizards, automated image optimization capabilities, an intuitive management console, and several other features that further simplify administrative tasks.

You don’t have to take our word for it though.

Try Parallels RAS yourself through this free 30-day full-featured trial.