---
title: "The honest math of self-hosting open-source software"
description: "A formula for the real yearly cost of running open-source software yourself, a worked sample, and when you should not self-host."
canonical: "https://lopifi.com/savings/how-to/self-hosting-honest-math"
---

# The honest math of self-hosting open-source software

> A formula for the real yearly cost of running open-source software yourself, a worked sample, and when you should not self-host.

Source: https://lopifi.com/savings/how-to/self-hosting-honest-math
Part of: Lopifi — US GAAP books on autopilot, checked by a CPA (https://lopifi.com)

---

Series: Move and replace. Reviewed 2026-10-25.

Open source removes a license fee. It does not remove the work. Before you replace a paid tool with one you run yourself, add up everything you will pay for in money and in hours, and compare it with the bill you are trying to stop. This guide gives you the formula and a worked sample so you can do it with your own numbers.

## Run your numbers

- [Self-hosting vs SaaS cost](https://lopifi.com/md/tools/selfhost-cost): The honest yearly cost of running open-source software yourself, set against the bill it replaces, with the seat count where it stops paying.

## What you actually pay for

The Nextcloud pages are used as one concrete example of what a documented self-hosted product asks of its operator. Other projects ask for different things; read the documentation of the one you are considering.

- Hosting: the server or managed instance the software runs on, plus a domain, a certificate and outbound email if it sends any.
- Backups: storage for copies, kept somewhere other than the server. Nextcloud's admin manual lists what a backup of its own install must include: the config folder, the data folder, the theme folder, any custom apps folder and the database.
- Upgrades: new versions on a schedule. The same manual says to make a fresh backup before every upgrade and that major releases cannot be skipped, so falling behind turns one upgrade into several.
- Patches: security fixes that cannot wait for the next scheduled upgrade.
- On-call: someone who notices it is down and fixes it, including when that someone is on vacation.
- Admin time: adding and removing people, resetting access, answering questions.
- Sign-in: single sign-on, if you need it, usually means running or buying another service next to the first.
- Setup: the one-time work of installing, configuring and moving data in.

## The formula

Write each input in a sheet with a name beside it, so the person who inherits this in a year knows where the numbers came from. If an input is a guess, mark it as a guess and re-check it after the first three months of real use.

- Yearly money = hosting + backup storage + any paid tooling around it (monitoring, outbound email, a sign-in service).
- Yearly hours = upgrades + patches + user support + restore tests + an allowance for incidents.
- Yearly time cost = yearly hours × hourly rate.
- One-time = setup hours × hourly rate, spread over the years you expect to run it.
- Yearly cost of running it = yearly money + yearly time cost + the yearly share of the one-time work.
- Compare with the yearly cost of the paid tool you would stop: price × seats × 12, from your own bills.

## A worked sample

Every number above is an invented sample chosen so you can follow the arithmetic. It is not a price list and it is not what any product costs. The point is the shape: in this sample the hours dominate, and the license fee is the smaller line.

Run the formula the other way to see what would have to be true. The money lines other than time come to $480 + $180 + $120 + $300 = $1,080, which leaves $1,800 − $1,080 = $720 for admin time. At $75 an hour that is 9.6 hours a year. If you cannot honestly run the tool in under about ten hours a year, this sample does not come out ahead.

- Hosting: $40 a month × 12 = $480.
- Backup storage: $15 a month × 12 = $180.
- Paid tooling (uptime monitoring and outbound email): $10 a month × 12 = $120.
- Hours in a year: upgrades 24 (2 a month), patches 12 (1 a month), user support 12 (1 a month), restore tests 4, incident allowance 8. Total 60 hours.
- Time cost: 60 hours × $75 = $4,500.
- Setup: 12 hours × $75 = $900, spread over 3 years = $300 a year.
- Yearly cost of running it: $480 + $180 + $120 + $4,500 + $300 = $5,580.
- Paid tool being replaced: 10 seats × $15 a month × 12 = $1,800.
- Difference: $5,580 − $1,800 = $3,780 a year more to run it yourself.

## When not to self-host

Self-hosting is a fit when the job is narrow, the data is easy to back up and replace, a named person wants the work, and the arithmetic still holds after you count that person's time. The license rules matter too; read [open-source licenses for founders](https://lopifi.com/md/savings/how-to/open-source-licenses) before you modify anything.

- Nobody on the team will own it by name. Software with no owner is not patched.
- It holds data you cannot afford to lose or to expose, and you have no tested restore.
- The tool is something people need every minute of the working day, and an outage would stop the company.
- The license fee is small next to the hours you just counted.
- You need the vendor's support, a signed agreement or a compliance report that the open-source project does not provide.
- The only reason is that the product is annoying. Switching to a cheaper or already-owned paid tool is often the smaller job.
- Your customers' contracts say where their data may live, and you have not checked what the new setup does to that.

## Before you commit

Pilot with one team. Keep the old plan running read-only until the replacement has done a real month of work, and keep the notice date for the old contract on the calendar, as described in [cancelling without penalties](https://lopifi.com/md/savings/how-to/cancel-without-penalties). A saving is counted when the old bill has stopped and the new costs are real, not before. For a full move plan, the [Dropbox migration guide](https://lopifi.com/md/savings/how-to/dropbox-migration) shows the order of steps for a file tool.

## Common questions

### Is self-hosting cheaper than paying for the product?

Not as a rule. Dropping the license fee removes one line and adds several others: a server, backups, updates, someone to answer when it breaks, and the hours it all takes. Whether the total comes out lower is a result you calculate for your own inputs, and sometimes it does not.

### What hourly rate do I use for admin time?

Use what an hour of that person's time costs the company, or what you would pay someone else to do it. If the work falls on a founder, the honest rate is not zero; it is the work that founder is not doing instead.

### Do we need to test restores?

Yes. A backup you have never restored is a hope. Put a restore test on the calendar once or twice a year and count those hours in the formula.

### What about single sign-on?

It depends on the tool and on how your team signs in. Many self-hosted tools support single sign-on through a separate identity service, which is another thing to run or buy. Check the project's documentation for the exact options before you count on it.

### How does this show up in the books?

Prepaid annual plans are a prepaid expense that releases over the term, so a switch that lands mid-term does not show its full effect until the plan would have renewed. Ask your CPA how any setup work is treated.

## Sources

- [Nextcloud admin manual: Backup](https://docs.nextcloud.com/server/latest/admin_manual/maintenance/backup.html) (read 2026-10-25)
- [Nextcloud admin manual: Upgrade](https://docs.nextcloud.com/server/latest/admin_manual/maintenance/upgrade.html) (read 2026-10-25)

## Keep going

- [Open-source licenses for founders](https://lopifi.com/md/savings/how-to/open-source-licenses): MIT, Apache, MPL, GPL and AGPL in plain English for founders who run open-source software instead of paying a license, and what each asks you to do.
- [Build a small internal tool](https://lopifi.com/md/savings/how-to/build-a-small-internal-tool): When one narrow job justifies a custom build, how to scope it to two screens, review AI-written code, and what to ask your CPA.
- [Dropbox migration, in depth](https://lopifi.com/md/savings/how-to/dropbox-migration): A start-to-finish plan for leaving Dropbox: inventory, destination, pilot, copy and verify, shared links, cutover, cancellation and how the books treat it.
- [Offboarding SaaS accounts](https://lopifi.com/md/savings/how-to/offboard-saas-accounts): Remove a leaver's seats, shared logins and SSO access in order, keep their data with an owner, and put the freed licenses to work or cancel them.
- [Run the free audit](https://lopifi.com/savings/audit)
- [All how-to guides](https://lopifi.com/md/savings/how-to)

*General information, not tax, legal or accounting advice.*