Comparing Cloud vs On-premise
-Five hidden costs people always forget about!!
Should I move my business to the cloud? It’s a question being asked more often. Too many business owners make the same cost comparison mistakes. Most are so focused on raw face value costs that they lose focus on the bigger picture, namely their TCO (total cost of ownership).
Too many people want to compare cloud vs. on premise costs in a purely single dimension. For on-premise, they mistakenly believe that costs stop and start with how much new hardware/software is needed to put a solution into place. And for cloud, similarly, all they see is that recurring monthly cost.
Regardless of what technology you are trying to decide on, don’t just follow the crowd. Take a look into the following areas, because your initial intentions may be skewed once you find out the entirety of costs entailed with staying on premise or moving to the cloud.
5) Electricity Costs
It’s that invisible commodity that just happens, and regardless of any computers being in an office, we need it anyway, but even though today’s servers are more energy efficient than they ever were, this doesn’t mean their electrical consumption costs should be ignored.
The cloud can bring a lot of potential savings to the table, but just like energy consumption is the sore thumb of keeping servers in-house, cloud migrations can slap us with a nasty realisation in another area: that we may not have enough bandwidth. If you’re contemplating any kind of major cloud move, speak with a trusted consultant on what kind of bandwidth you should have in place. Any increased needs in internet connection costs should be accounted for in an objective comparison of going cloud or staying in-house.
3) The Forgotten “5 Year Rule” For On-Premise Servers
On average companies are replacing on-premise systems every 5 years. It may be different depending on your industry, but generally, five years is a good lifespan for a 24/7 server used in most workplaces.
Even in situations where staying in house may be cheaper on a monthly basis than going to the cloud, your five year replacement/upgrade costs may be so hefty due to the size of the hardware needed or licensing entailed, that going to the cloud may still be the better long term option.
The most important item to note is that you cannot pit on-premise cost comparisons solely on initial capital outlay of a server and the recurring monthly fees of a cloud service.
2) What Does Each Hour of Downtime Cost Your Business?
The cloud gets a lot of publicity about its outages. Google had Gmail go down in September last and even Microsoft’s cloud Office 365, experienced its third outage in 2013. However, compared to on-premise systems, Cloud Solutions still see much better reliability and uptime. The question here which applies to both environments is: what does each hour of downtime cost your business? €100? €500? Run your own numbers to find out. You may be surprised. How do cloud providers achieve such excellent uptime figures? The vast technical backbones that power cloud data centres are technologies that are out of reach for anyone except the largest enterprises. The average small business with a server just can’t compete.
1) Anyone Can Compare Recurring Costs, But Do You Know Your TCO?
This is the last but MOST important point of them all. Most of the time, this never even gets discussed because as said earlier: out of sight, out of mind. How wrong such a mentality can be.
Total Cost of Ownership is the most accurate, objective way to compare on-premise and cloud solutions. Recurring monthly costs always take precedence over initial hardware CAPEX costs, and the nasty “5 Year Rule” spike, which is why TCO puts all of these into perspective. Run the numbers, and find out where your needs stand. If you don’t understand what your 5, 8, 10 year (or longer) TCO looks like, you cannot compare the cloud and physical systems head to head at an accurately, analytical level.
Making the same mistakes will end up giving you the false impression that your chosen approach is saving you money, when in the end, that may be far from the case.
Don’t let salespeople guide your decisions based on their pitches alone. If you can objectively compare your own standing from TCO to downtime cost per hour, among other factors, you’re in a position of power to make the best choice. Invariably this leads to the best results for your business.