The Great Cloud Cost Debate is Over

In the early days of the cloud, an intense debate raged over whether the cloud was cheaper than on-premises IT infrastructure. Even several years ago this was still very much an open and debatable question. To cloud opponents’ credit, if the cloud is not done properly, it is not necessarily cheaper – and in fact can be more expensive. These days, it is an increasingly rare exception to the positive cloud economics rule.

IT has learned a lot about the cloud, how to migrate, adapt existing applications and workloads to the cloud, and how to manage expenses and contracts. At the same time, smart IT professionals have not just learned how to size their cloud properly – but control its expansion without sacrificing function. That is what makes the cloud today less expensive – when the cloud is properly governed.

Economies of Scale That Don’t Quit

Cloud economics have also evolved. Large cloud providers and SaaS vendors are benefiting from incredible ever-improving economies of scale. They now have massive and highly efficient server farms and leverage virtualization to the hilt to take total advantage of every infrastructure dollar spent. In a related way, they have hired a bevy of top security experts and leverage layers of the best security software the market has to offer – and deftly apply both expertise and security solutions across their cloud infrastructure. Not only are their clouds affordable, but they also offer a near infinite ability to scale that is nearly impossible to match in your on-premises infrastructure – no matter what Moore’s Law postulates.

Adding to that, the cloud is an intensely competitive marketplace with major cloud infrastructure providers such as Microsoft, Amazon and Google all fighting for every scrap of business. Cloud application providers are waging the same war, clawing for your business, and fully committed to being economically competitive with ALL their rivals. These dynamics apply across a range of cloud services, whether it is Infrastructure-as-a-Service (IaaS), more full-featured Platform-as-a-Service (PaaS) and, at the top of that heap, Software-as-a-Service (SaaS) and Disaster-Recovery-as-a-Service (DRaaS).

Economic Benefits Beyond OpEx

Many in IT moved to the cloud because the operating expense (OpEx) model provides more economic flexibility than the financially locked-in capital expense (CapEx) model. The costs are predictable with OpEx, and generally lower. Far more interesting is that cloud services move at lightning speed and you can get new features and performance without any new hardware investment. With on-premises, you’re locked into the hardware you bought for a three-to-five-year period. Meanwhile the industry moves so fast that this hardware is obsolete before it is fully amortized, or the lease ends.

Companies still relying upon on-premises gear struggle to scale their IT operations and doing so takes time. More capacity means more hardware, both servers and storage as well as larger computing systems and acquiring and installing this hardware can easily take several weeks or months.  This can result in lost business for whatever period of time customer demand outstrips the compute capacity of say your customer facing web application.  Compare that to the cloud where you can scale your compute capacity up or out in a matter of minutes to meet sudden increases in demand for your applications.  And if the spike in demand is temporary, you can scale compute capacity back down, so you are only using and paying for what you need.

Unexpected Early Cloud Costs

A handful of early cloud adopters moved workloads to AWS – and at first were happy. Months later new bills came in, costs had risen dramatically, and AWS shockingly was far more expensive than what they had before. A small number of these customers actually cancelled AWS contracts and moved back to on-premises.

What happened was that these AWS workloads increased, leading to cloud sticker shock. There’s a natural increase in the need for processing as IT demands grow, but much of the problem came from not properly sizing workloads and governing the new cloud environment.

This actually caused providers to relook at pricing and workload costs, and at the same time guide their new customers to more properly size their workloads. That did away with much of the problem, but the real breakthrough was cloud customers themselves getting way smarter about how they provision cloud workloads and deal with their increases in processing needs. You don’t hear these horror stories anymore, and the debate about whether the cloud is actually cheaper has gone away – the cloud question was answered in the affirmative.

The cloud can be more expensive than on-premises if you’re doing it wrong. If you’re doing it correctly, the cloud is always cheaper, even with the fact that bare-metal hardware has gotten a lot less expensive.

If you do the cloud properly with the proper governance, proper controls, and the proper guardrails, your budget will always be happy.

Robert Leving's Photo

Robert Levings

Senior Project Manager, Cloud Secure Infrastructure, ACTS

Robert’s LinkedIn

Learn More About Our Solutions:

Cloud Business Case Modeling
Analyze and rationalize your IT footprint with the data and business case modeling that supports an informed transformation decision.

Cloud Migration Program
The Cloud Migration program defines the benefits of rehosting, refactoring, rebuilding or replacing (5 R’s of rationalization) when moving to the cloud.

Migration Analysis Solutions
Analyze up to 10 applications for cloud & modernization readiness using the CAST Highlight Platform.

Looking up at skyscrapers

The Financial Benefits of Cloud Migration – White Paper

In this comprehensive white paper we ask the question on whether the cost of moving to the cloud is, in fact, more cost effective than keeping an on-premises environment.

Download White Paper> >

Cloud Economics Snapshot – Infographic

The cloud is revolutionizing how IT and business is done. If you are not in the cloud, your competitor likely is, and their competitive advantage is hard to overcome.

Download Infographic> >