Lounge

Steve,

you are right in that the hardware+connectivity is not the costly part. After all, Moodle will run great on a cheap machine costing less than 1K -- it is a one-time expenditure and you'll own the machine, too.

Expertise to set up, tune and run Moodle 24/7 for high numbers of users is hard to come by and retain. Having a pool of knowledgeable people reachable 24/7 is complex and costly to do.

Backups, networking, disk quotas, security system upgrades, ensuring that heavy Moodle processes play nicely and don't hog the server... there's a lot of stuff to do, even on a managed server. It's cool stuff, and definitely fun, but you want to include it in the picture.