Subscriptions: Annual charge vs monthly

It largely depends on the "frequency of use" of your product.
Let's say it's something highly useful and you managed to convince your customer to buy it.

If he's gonna use it once or twice a year, billing monthly will result in you losing 10 months of possible income.
If he's gonna use it every two days, both monthly and yearly billing are suitable, in which case I'd follow @mgates advice to offer both with a discount to bring another incentive to the table.

In any case, you probably don't want to ONLY offer a yearly billing to a customer, at least not on his first subscription. If he doesn't know your product or its values, asking him for a one-year engagement from the start is too high.

About your server-related costs, you could probably rely on one or two "whale" customers that you treat like kings support-wise, so they agree to a yearly subscription from the start and help your runway going.

Is your product something that I would use regularly over the course of a year?

Offer both with a discount for yeary signups. I see most SaaS offer 10% to 20% off (usually resulting in like 2 months) but the tradeoff is: you get a lot of cash up front vs. monthly where it is regular pricing. So a company charging $10 a month for a product which would be $120 for the year. Paying for the year is just $99.

Of course, if I find your product useful, I'm going to do what I can to save extra money including purchasing bulk. $120 - $99 = $21 savings? Sure, I just bought myself at least a half to a bit more than a half a tank of gas. Or maybe a meal. But that's just me. There's other people who prefer to pay $10 a month because they fear the commitment of an entire year to something or want to pull back.

DreamHost uses this method too: the longer you buy, the bigger the discount. I had purchased their 10 year plan and pay $5.95 for host per month. Meant I had to pay something like $750 upfront or something like that, but it was the largest discount. Regular price for DreamHost by the month is like $10.95 for shared hosting.

I love the idea. For one of my web hosting companies, I offer the cheapest Bare Metal Hosting (https://baremetalhost.com) you will ever find. In fact, you won't find it anywhere on the internet. I'm the only one offering it for an insanely affordable price. But it requires a commitment of a year: $29.95 which comes out to $2.49 per month. The catch, you ask? There is a tradeoff. 1. No refunds; and 2. You only get 1 GB SSD and 1 GB MySQL database. And it's "bare minimum support". Basically shared hosting on a Bare Metal Server. But you get the full power of the Bare Metal Server, 4 CPU - 8 threads, and access to 32 GB memory. I think I have like 2 or 3 customers on it now.

20 users would be $600 a year or $50 a month. Not much, but it's either feeding me, putting gas in my tank, or paying for my gym membership. Streams of revenue maketh the salary for a lifetime.