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Private Cloud vs. On-Premises

More and more companies are moving to private cloud solutions every day. They are doing so for enhanced mobility, increased security, and to eliminate the headaches of managing servers and IT. But what about the cost? Will the cloud save them money?

Is a private cloud cost effective compared to an on-premises environment?

There are many factors involved in answering this question–some tangible, others difficult to quantify. However, with a little number crunching and the right data–it can be done. The biggest factor in the equation is quantifying and tallying the costs associated with maintaining an on-premises system. Some costs occur every few years, others monthly. We’ll need to add them all up, determine an annual cost, and then compare them to a private cloud solution. Let’s get started.

On-Premises Cost

Costs for implementing and maintaining an on-premises server and the related IT are sporadic, and sometimes hidden. They vary depending on how often you replace your servers, how heavily you utilize outside IT support, and whether or not you take a proactive approach to IT management.

Let’s start by defining the useful life of your servers. Traditional IT wisdom says you should replace your servers every 3 to 5 years. (You’re not just waiting for your servers to die, are you?) We’ll use this replacement cycle as our analysis period when we calculate the total cost of on-premises (and will do the same for a private cloud solution, to compare apples to apples).

With that window, we can now identify each cost associated with the server(s) and your company’s greater IT infrastructure. Below is a list of individual costs you are likely to incur over the analysis period–the estimated life of your server.

On-Premise Costs: Up-Front

Costs incurred each new server cycle (once per analysis period).

On-Premise Costs: Ongoing

Costs incurred on an ongoing basis, for either a fixed monthly service contract or a time-and-material basis

On-Premise Costs: Unplanned

As you can see–some costs are fixed and predicable, others are wildly unpredictable. In any case, add all of these costs together, based on your historical or projected costs–over the analysis period. Next we’ll do the same for a Private Cloud solution.

Private Cloud Costs

The costs for Private Cloud should be fixed and predictable. A reputable Private Cloud provider will deliver all the necessary IT components your firm needs for a fixed fee per user, per month.

A Private Cloud includes the IT platform, applications, and services your company needs–nearly everything you would have to purchase and maintain yourself in an on-premises implementation, including:

  • Server infrastructure

  • Hosting for your applications

  • Storage for your documents and data

  • Microsoft Office

  • Microsoft Exchange Email

  • Microsoft SQL Server (required by most ERPs)

  • Antivirus/endpoint security

  • Unlimited IT support

  • Managed backups

With your IT and infrastructure provided for a fixed fee, per user, per month: your costs may be less each year and significantly more predictable. To calculate the total cost of a Private Cloud model for your company, simply multiply the fixed monthly cost of a Private Cloud solution by the number of months in the analysis period, then add any setup or onboarding fees quoted by the provider.

The Bottom Line

When you analyze this side-by-side comparison, you’re likely to find that a Private Cloud is either comparable to or less than the total cost of an on-premises environment.

The Intangibles

We’ve walked through the financial case for a Private Cloud solution. But what about the other factors? After all–it’s not just about economics. Here are some additional, important factors to consider when comparing on-Premises to a Private Cloud solution.

Do Your Own Analysis

There you have it–we’ve compared the economics and the intangible factors for an On-Premises vs. Private Cloud platform.

Your company depends on it.