You’ve probably already heard of the many advantages associated with cloud migration. Perhaps you already operate within a hybrid cloud environment and have seen improvements in security, scalability, and flexibility. But, what about a complete migration, and how much would it cost? Is a cloud service provider cheaper than on-premise? In this piece, we will explore the cost of the cloud vs. on-premise to determine the better value and ROI potential.

Factors to consider

Various factors will impact how much you pay for the cloud vs. an on-premise infrastructure. A cloud service provider can discuss your options. However, the costs will depend on your organizational needs. Here are the factors to consider:

  • An initial investment in hardware, servers, and storage.
  • Server maintenance costs and replacement parts.
  • Redundant purchases of hardware to ensure high availability.
  • Utility expenses for power and cooling.
  • Software licenses.
  • Labor costs. (High salary costs for IT specialists)
  • Expensive to match scalability, expertise, redundancy, and security offered by a cloud service provider.

It’s also critical to review your current infrastructure:

  • Can your business withstand downtime and a reputation hit?
  • Are your legacy systems failing to keep up in the digital age?
  • Are you starting from scratch?
  • Do you have a large environment?
  • Would you need the flexibility to scale?
What about upfront hardware or software license costs?

One of the most significant benefits of partnering with a cloud service provider is that you don’t have to make massive hardware investments. Instead, you rent hardware for a budget-friendly monthly fee. The monthly billing structure is also predictable, helping to make it easier to budget IT spend.

For instance, if you don’t have to spend any money upfront on a new server, you can then invest those resources in marketing or even R&D. Besides, you can spend more money on initiatives that help grow your business and increase profitability.

Further, upfront costs for server licenses are quite expensive. On the other hand, your cloud service provider builds software licensing fees into the monthly bill. As a result, you get full use of the license without having to fork out exorbitant upfront costs.

Will you need hardware replacements?

Another reason to look at the cloud is that you don’t ever have to worry about replacing or maintaining hardware. With on-premise infrastructure, you will have to replace your hardware every few years because technology is evolving rapidly. To remain competitive, your technology must move at the speed consumers expect. Also, to avoid equipment failure, replacements are necessary. Older systems get bogged down with data, become less efficient, and have a higher probability of failure. How would your business survive an outage or data loss if your systems went down?

And, of course, new servers are not cheap. Spending capital on new servers every few years can add up quickly – especially if your business revenue fluctuates. In contrast, with a cloud service provider, you won’t have to deal with any unexpected costs such as a broken server or trying to purchase an emergency replacement ASAP.

Pay for usage

When you transition to the cloud, you’ll find that you only have to pay for what you use. With an on-premise server, this is the opposite – once you run out of storage space, you have to buy another server to increase availability.
For example, imagine you are nearing capacity on your current servers. Now imagine that your marketing team runs a promotion, and you get a significant boost in traffic. Your existing servers are already running at near capacity, meaning you don’t have these additional users’ availability.
What would happen if your servers have limited ability, but your marketing team wants to run a promotion to bring in more traffic? Would your business have the capacity for a surge in traffic? Yet, it would help if you had the customers and the potential revenue.

If you work with a cloud service provider, you can increase availability and capacity when you need it. You don’t have to buy a new server to accommodate the new customers. You run efficiently because, again, you only pay for what you use. If you were to buy a new server for an upcoming promotion, it might reach capacity during the promotion but remain primarily unused once the marketing campaign is over. Yet, the cloud can scale up or down as needed.

Utility costs

On top of the costs of physical servers comes the price for space, power, and cooling. Depending on how many servers you have, these costs can add up quickly. You might even have to rent out additional space to house your servers. Moreover, powering and cooling is a 24/7 activity. However, with the cloud, you don’t have to budget for utility costs.

IT maintenance expenses

It’s easy to forget IT personnel costs. On average, an IT manager can easily command a six-figure annual salary, not including PTO and benefits. And, an IT technician’s salary starts at around $40k annually before PTO and benefits. Also, they are not available 24/7 and may not be around when an emergency strikes. Nonetheless, it would help if you had a team to manage and maintain your on-premise infrastructure. If you have an in-house infrastructure, most of your IT department’s time will be spent on maintenance. But, if you partner with a cloud service provider, they don’t have to spend all their days on maintenance. They can engage in strategic projects to help your company improve productivity and efficiency. If your IT staff is small, it may also enhance engagement if they can work on proactive projects instead of putting out fires all day.

Final thought

Invariably, most businesses find that the cloud is cheaper than on-premise. When you consider the factors noted above, it’s easy to see why. Of course, it depends on what your business needs. SSI can help your organization understand the cost benefits and how easy it is to migrate. Contact us today for a personalized consultation.