Is Cloud Really That Much Cheaper Than on Premises?

the cloud costs

Cloud computing is touted as the perfect alternative to utilising systems based on commercial premises, allowing firms to outsource data storage, apps and other services to third parties, thus cutting costs in the process.

However, there are certainly some people out there who are still sceptical about the types of benefit that the cloud can offer. Most notably, there are those who challenge the notion that the cloud is actually that much cheaper than local set-ups, arguing that sticking with in-house solutions and avoiding adoption will leave businesses in a better position from a financial point of view.

It is arguably unhelpful to simply dismiss the cloud as a faddy new technology, or one that will ultimately fade into obscurity, if only because it has already permeated so many areas of the business world.

In order to establish whether or not the cloud is a more cost-effective solution than on premises set-ups, it is necessary to examine the ways in which the two differ and see whether migrating to the cloud is justifiable.

Economies of Scale

Perhaps the main reason for businesses to switch over to the cloud is that in many instances it is difficult for a single company to replicate the scale and power of outsourced services using internal equipment.

Because the cloud can be invested in on demand, with extra capacity added as and when it is required, scaling to fit day-to-day requirements, there is never any waste. Companies are not paying to sustain and update equipment which may not actually meet their needs, either by being too restrictive or simply too expansive for average workloads.

The scalability of the cloud becomes even more pertinent in the case of small and medium sized businesses, where the available funding for the IT infrastructure may be tighter than ever. The cloud allows firms to access services and capabilities which might otherwise be too costly to consider, even if they employ just one person.

The result is that cost is scalable in tandem with the type of cloud service that is actually chosen, which should help firms appreciate its benefits.

Long-Term Considerations

Some cloud critics complain that shifting to the cloud will leave businesses indentured to a single provider for a protracted period, resulting in ongoing costs and difficulties associated with ending a contract that could make it tough to look elsewhere.

However, such concerns, even if they are ultimately unfounded, still apply in an amplified form to on premises solutions which might have been traditionally chosen.

Those relying on in-house set-ups will invariably have to cope with an endless cycle of installation, maintenance and eventual upgrade, with such landmarks looming on the horizon as major costs to bear on top of the day-to-day expense of running a business.

With the cloud, this is largely removed from the responsibility of individual companies, with the collective force of all users coming together to allow providers to actively preserve, protect and update as they go along.

As such, there will be no sudden one-off expenses to bear, creeping up on firms or coming out of nowhere. In addition, the problems with compatibility and long-term sustainability will be burdens not of the business but of the provider, so even if companies are locked into a contract it is in their interests to keep products fresh and competitive.

It is this competition which will drive the cloud to be more affordable over time, so migration sooner rather than later will allow both short and long-term financial benefits to be felt by those who are quicker out of the gate.

About the Author: Daisy Group plc provides business cloud hosting services, managed hosting, colocation and cloud computing services to corporate organisations and the public sector. With  four Data Centres in Manchester, Jersey, London and Southampton which provide 24/7 support 365 Daisy are the natural choice for business hosting solutions.

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  • I’m not sure if this article spells out when the cloud is really cheaper than a traditional in house setup. Cloud based solutions shouldn’t be sold from a cost savings standpoint as that isn’t where the real value or strengths of cloud computing exist. We should communicate that cloud computing brings greater values to businesses. More values and more benifits does mean that it should cost more.

    Over a 4-5 year period most cloud solutions will cost more – However, the values and features that the cloud offers may be worth more to businesses as potentially these benifits weren’t available in their on premise (private cloud) solutions.

    I’m a big fan of cloud computing – not a fan of selling it as a cost savings tool. It will bring cost savings after we move past the early adoption phase in the next several years. Just not yet from my perspective.

    Vince Arden
    CFO
    Preferred Communication Systems

    • Ivan

      Vince,

      I agree that the media emphasizes the cost-cutting benefits of the cloud, and we need to do better in educating our audiences. In fact, major publications also give readers wrong impression that the cloud is useless from the costs standpoint as it is deemed as not cheaper than in-house solutions. Maybe I should publish more posts influencing people to see from the value for money, instead of who’s cheaper.

      Thanks for sharing your valuable insight!