There's a lot of factors to consider when deciding to go to the cloud, and it's a decision that more and more organizations have to make every day. Almost every solution out there today has an option to be on-premise or served up as SaaS, PaaS or IaaS and have some of the critical functions offloaded to a cloud or virtualized environment.
While factors like security and location of the Cloud are important to many, the most significant factor tends to always be cost. But you aren't comparing apples to apples, so determining which is actually more cost-effective in the long run is a hard task.
We recently came across this great article by Derrick Wlodarz on the Six hidden costs people always forget about when comparing cloud vs on-premise. His advice is " Regardless of what technology you are trying to decide on a future path for, don't just follow the crowd. Take a look into the areas I am going to shed some light on, because your initital intentions may be skewed once you find out the entirety of the costs. So what are those areas? We've summarized them below:
- Electricity Costs: This is an expense that many organizations forget about overtime that can be hugely reduced by using Cloud technology. On premise servers require huge energy costs to both function and be cooled, so by using or moving to Cloud technology you can eliminate these additional bills that are eating up your finances.
- Cloud Bandwidth: Friend or foe? Although the Cloud can bring a lot of potential energy savings to the table, the increased needs in internet connection costs need to be accounted for. Organizations bear in mind that without sufficient bandwidth in and out of the network, the savings of not using an internal server may be lost.
- Outbound Bandwidth Will Cost You: Sure, the Cloud saves many organizations the costs of maintaining an on premise system. But Cloud systems come with some hidden baggage of their own! Namely? Outbound bandwidth fees. Basically, providers allow users to move as much data as they would like into the Cloud, but limit the amount they can pull out. Some of the big industry players have plans that allow for 1 to 5GB of outbound data per month, which is more than enough for smaller organizations. But once your users surpass this allowance you can and will encounter huge bandwidth fees. Before moving to the Cloud, make sure you know all you can about your provider’s usage plans. That way you’re informed when you settle on a plan and service provider.
- The 5 Year Rule: A sometimes forgotten concept, the 5 year rule states that on average organizations are replacing on premise systems every 5 years; a relatively good lifespan for a 24/7 server. Unfortunately, many decision makers don’t take this into account because they see the cost as being too far in the future to consider now. However, when looking at the Cloud vs. On premise it is crucial to consider this as an expense for an on premise system.
- Hourly Cost of Downtime: Regardless of the most infamous Cloud crashes of the last few years, compared to on premise systems the Cloud still has much better reliability and uptime. So the question now is how much does it cost your organization per hour of downtime? This is key for you to consider before making a decision to go with either system.
- Total Cost of Ownership (TCO): This is the most accurate and unbiased way to compare on premise and Cloud solutions. Though it is important to consider recurring costs, it is even more critical to remember your CAPEX costs and the cost of replacing of an on premise system. By using a TCO formula to make your decision, you’ll be well on your way to making the best choice for your organization.
Although the use of Cloud services may cause your organization a few problems, it can solve many that you may be having with your current system. With fantastic support plans, maintenance, and subscriptions based on number of users, Cloud computing can still be a great option for your organization. Check out Derrick Wlodarz's full article.
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