What are the costs benefits of the cloud?
The above image illustrates the different costs involved in implementing an on-premises system versus a cloud-based one. The key point is that an on-premises solution has a number of hidden costs that you may not be aware of, but which could mean you end up paying significantly more over the lifetime of the system than a cloud-based alternative.
Listed below are some of the main reasons why the cloud-based option can deliver cost benefits.
No upfront hardware or software licence costs
Firstly, there is no significant initial hardware investment required in the cloud environment, since it can be rented on the basis of a monthly recurring fee. In contrast, the on-premises environment will include a range of direct hardware-related costs including physical servers, spare parts and physical materials.
The same is also the case when it comes to server software licencing structures. For example, in an on-premises environment, businesses will typically buy their server software licences upfront, whilst a cloud-based infrastructure allows organisations to use the server software on a subscription-based pricing model.
Eliminating hardware replacement costs
As technology evolves, you’ll need to upgrade the hardware to stay abreast and remain competitive. Older hardware is also more prone to failure, with the resultant downtime. Buying new hardware on-premises requires significant capital investments. However, with a cloud-based infrastructure any hardware replacement costs are handled by the subscription-based pricing scheme.
Reducing maintenance costs
If you have on-premises equipment, a good amount of your IT department’s time (and its associated salaries) will be spent on maintenance tasks such as ensuring everything is running properly, undertaking patching and software upgrades, and ensuring disaster recovery procedures are in place.
However, by migrating to the cloud, these tasks are handled by cloud services providers who deal with all maintenance, infrastructure and upgrade-related activities and pick-up the related costs.
Benefiting from pay-as-you-go pricing
Cloud-based infrastructures allow businesses to pay only for services consumed on a pay-as-you-go pricing model. These infrastructures are scalable and can grow and shrink quickly, based on subscriber needs. Cloud customers have the flexibility to start, end or modify subscriptions according to their needs compared to on-premises solutions.
This contrasts with the on-premises equivalent where, for example, a server only has so much storage space and availability, so that when you reach this limit you’ll need to buy an additional server to increase availability or storage.
Reducing physical space and power costs
Given the massive surge in energy costs, the fact that an organisation doesn’t actually manage the physical IT equipment in a cloud environment has become an increasingly important benefit. There is no need to worry about the associated costs for powering and controlling the temperatures of servers, or the physical space for housing them.
In addition to the specific cost savings detailed above, there are also a number of business advantages of the cloud approach that can provide more intangible cost benefits. Examples here include:
- Accelerates time-to-market. A cloud-based infrastructure allows for the rapid development and launch of new products and services because IT teams can quickly scale up or down the computational resources in response to changes in market demands, thus becoming more competitive and ultimately more profitable.
- Offers enhanced security. Cloud-based infrastructures provide robust security, including end-to-end encryption and multi-factor authentication (MFA), which can be beyond the affordability of many businesses. This helps to ensure the business does not fall victim to ransomware (with all of the associated costs) or face downtime as the result of attacks by hackers or cyber criminals.
- Supports business continuity. Cloud-based infrastructures typically offer automatic recovery and data backup measures, meaning that businesses are better able to respond to any security incidents or data loss and minimise the effects on their business operations.
Remember – costs need to be managed!
We’ve discussed many of the financial benefits of the cloud, but it’s also important to point out that the overall costs need to be managed effectively.
One of the many benefits of the cloud in general is the long list of services and tools that are available. However, if they are not controlled and appropriately managed, they can easily spiral out of control. Fortunately, many cloud providers offer tools that help you to manage your spending in the cloud so that you fully understand what you are paying for and avoid any unexpected costs.
In an on-premises environment all aspects of IT are ultimately the responsibility of the business. This includes minimising downtime, undertaking maintenance, implementing appropriate security measures and ensuring data is adequately backed-up. Migrating to the cloud moves this responsibility to the service provider, who is far better placed to manage these requirements as they form a core part of their overall business. What’s more, as we’ve seen above, they also have the potential to significantly lower costs when compared to a self-hosting option.