Is the Cloud Actually Cheaper than On-Premise Solutions?
Exploring the Total Cost of Ownership of the Cloud
January 11, 2022
Keeping your organization ahead of the curve is about investing in the right people, tools, and infrastructure. The Cloud often plays a key role in modernizing and comes with many benefits. Cloud services are uniquely flexible, scalable, and secure when compared to on-premise solutions. The fact that so many organizations and applications are migrating may seem proof enough that it’s a worthwhile investment. Indeed, many providers argue that the Cloud is cheaper than on-premise, but is that true?
Many factors affect the total cost of ownership (TCO) for the Cloud. In this multi-part series, we will explore the real cost of a cloud solution and compare some of the benefits and disadvantages of cloud vs on-premise.
What Goes Into the Price of a Cloud Solution?
The answer to this question will be different for everyone. Your specific digital infrastructure needs and the scale of your operation are the two main factors in determining how much you’ll spend on the cloud. However, some basics will help you understand what goes into pricing.
Factors That Save You Money:
Hardware and Physical Infrastructure:
With the Cloud, you can eliminate the need for physical servers, supplies, and spare parts. This saves you money not only by freeing up the “dead” space your equipment was occupying but also cuts costs in maintenance, utilities, and future upgrade.
Disaster Recovery:
The ability to quickly recover information in the event of a disaster is one of the major advantages of the Cloud. If you have an on-premise disaster recovery system in place, you will want to look into what is currently costing you and consider how secure it is overall. The cloud has redundant architecture that duplicates your data across multiple locations to ensure no matter where disaster strikes your data is safe, which takes the pressure off your team.
Labor & Personnel:
How many man-hours are devoted to maintaining, securing, and upgrading your system? Before considering migration you will want to calculate both in-house and outsourced operating costs for your current system. If you have specific members of your IT team primarily devoted to running these systems you may be able to divert their efforts to more ambitious or impactful projects by migrating. Likewise, the improved efficiency offered by the wide range of cloud tools and AI features can streamline processes saving your team additional time and thus money.
Software Licenses:
In a typical on-premise set up you purchase your software licenses upfront which can be pricey. Cloud-based licensing allows you to build some of the cost into your monthly cloud payments in the form of a subscription model. With a cloud-centered licensing structure you have more control over your licenses, their analytics, and scale more effectively. Additionally, you may be able to replace some applications with cheaper commercial software delivered as a service.
Factors That Can Cost You Money:
Migration:
Both the actual migration process and the initial research phase will require a financial investment. Moving large amounts of data, applications, and infrastructure to the Cloud can come sometimes with a big upfront cost. The type of migration you choose is an important consideration. Will you be reposting applications without making major changes or completely refactoring your applications to best take advantage of the Cloud? A simple lift and shift or complete overhaul of your services can vastly change the timeline and cost of migrating.
Getting a cloud assessment is the best way to get a clear picture of how much you’ll need to allocate.
Monthly Cloud Costs:
The ongoing price of operating your applications in the cloud will vary. Scaling your services with the Cloud is incredibly easy which is typically a great way to make the most of your funds. However, the on-demand structure of the Cloud means it can be easy to blow your budget by setting up multiple instances and onboarding tons of great new AI tools. Since you only pay for what you use, it’s important to track your usage to prevent costs from spiraling out of control.
Outages:
Although the Cloud is highly reliable, outages do sometimes happen. Since you aren’t managing the infrastructure yourself there is little you can do if there is an interruption. An outage can cost your team money and it’s something that you need to be prepared for. It’s worth noting that when running an on-premise solution you may have server downtime as well. Ultimately, you may experience less downtime with the Cloud due to its more resilient (and redundant) architecture.
So is Cloud Actually Cheaper?
There are certainly considerable advantages to migrating to the cloud regardless of cost, but the question remains – which is actually cheaper? This depends a little bit on where you are in your modernization journey. When getting started from scratch, the Cloud is definitely a more cost-effective strategy, so if you’re a new business it will serve you best, to begin with, with digital cloud infrastructure in mind. For larger organizations that have a very involved physical infrastructure, the cost of restructuring can be a barrier to cloud adoption. In the short term, it’s cheaper to stick with the physical infrastructure you already have, but as your equipment, software licenses, and other infrastructure ages it begins to become a liability. In the long term, the agility of the Cloud is going to save you money because it continues to stay up to date and relevant. You will always have access to the latest strategies and tools without the need to manually upgrade.
Does the next question become when do the cost savings actually kick in? In our next cloud blog, we will explore strategies to keep your cloud TCO low and within budget.
How Can DOMA Help You Determine the Cost of the Cloud?
DOMA offers a comprehensive Cloud Assessment to help you determine the total cost of ownership for you cloud migration and managed services. Our approach to onboarding the Cloud involves four steps – assessment, delivery of findings, an immersion day, and then the launch of your first cloud project. This crawl, walk, run approach will you help you get a clear picture of how the Cloud will impact your organization and help you develop a clear plan for your migration.
About DOMA- Powered by Tech, Driven by People
DOMA Technologies (DOMA) is a software development and digital transformation company whose mission is to change customer lives by lightening their workload through faster and more targeted access to their data. Since 2000, our team of 200+ experts has helped businesses navigate all aspects of the digital world. We are a dedicated strategic partner for the federal government and private sector clients at every stage of their unique digital transformation journey.
Author:
Danielle Wethington
Director of Communications
Remote Work with the Cloud
Learn more about digital transformation.
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