Public Cloud vs On Premises Cost: Which Is More Effective for Your Business?

More businesses than ever before are turning to public cloud infrastructure — but does it actually save you money?

Every organization wants to be more efficient and innovative; many see the public cloud as the easy and smart solution. But will the public cloud will actually help organizations achieve this goal while saving money? Maybe. Maybe not. 

Taking a chance on different technology might be a worthwhile risk in a booming economy. At the very least, it’s easier to justify as costs aren’t under as much scrutiny. However, that’s not our current financial reality, and CIOs must increasingly defend the budgeting decisions they make now — especially when it comes to investments that are difficult to reverse.

An assessment of public cloud vs on-premises cost is crucial for any CIO looking to make an informed decision on whether they should stick with their current IT infrastructure or proceed with migrating workloads to a different IT infrastructure or the public cloud. But analyzing cost is only a part of the whole picture — we’ll help you fill out the rest of the details so you can make the right decision for your organization. 

Public cloud vs on-premises cost: Which to choose?

Providing a definitive comparison between public cloud vs on-premises cost is more difficult than crunching a few numbers and arriving at a simple numerical answer. Everyone’s needs differ; some organizations have workloads that are compute intensive, others are more storage heavy. The point is that every organization is different, which means that the best IT infrastructure for them will differ.

As you’ll see, cost is the last factor to consider, not the first.

It’s known that the public cloud is typically 30-50% more expensive than on-premises IT infrastructure. If you’re looking just at cost, it’s hard to say that public cloud is a more cost-effective option, because it usually isn’t. But that’s not all that goes into a proper evaluation of IT infrastructure options, so we must look at other factors.

How to properly evaluate IT infrastructure options

Organizations acquire IT infrastructure to run the applications necessary for the organization to operate and hopefully, succeed in their particular industry. Usually, the analysis goes no further than looking at what the cost of an IT infrastructure option is. However, these days, we’re seeing most organizations not even really doing much analysis at all. We’ve interviewed over a dozen CIOs and asked them to explain their evaluation process. To date, not one CIO has indicated their organization has a process. That’s alarming.

So, let us show you how to do an effective evaluation of the available options for where to place your workloads.

To begin, there are three (3) sets of factors to consider with each of the available IT infrastructure options. These are:

• Operational factors
• Organizational factors
• Financial factors

Let’s look at each.

Operational Factors 
These are the features that make up the day-to-day operations of your workloads. Each workload is different and should be considered independently. Some of the operational factors that need to be considered are:

• Performance requirements
• Storage requirements
• Security
• Ability to share infrastructure with other workloads
• Networking
• Latency
• Location of the infrastructure
• Resilience
• Backup and Recovery
• Protection against Ransomware
• And others

Organizational Factors 
​These factors are less tangible than operational or financial, but they’re still important as they will affect your decision whether you realize them or not. Some organizational factors include:

• Skillset of the organization’s IT workforce
• Relationships with vendors
• Competitive posture 
• Mergers and acquisitions
• And others

Financial Factors 
​These factors are easy to identify if you do your homework. It’s important to consider the fixed and variable nature of the costs. Here are some financial factors:

• Hardware costs
• Software costs
• Networking costs
• Rack space
• Power costs
• Cooling costs
• Systems management costs 

What are your IT infrastructure options?

There are four (4) options to run your workloads. These are:

• On-premises — Legacy: Also known as three-tier architecture, legacy on-premises infrastructure utilizes separate and distinct components — like servers, storage, storage networking, networking, and virtualization — and combines them into an overall infrastructure.
• On-premises — Hyperconverged: Hyperconverged architecture is a modern approach to on-premises infrastructure. It offers functionality similar to the public cloud but allows complete control over its construction and use.
• Software-as-a-Service (SaaS): These are subscription-based options that allow you to run core functions on an external service. Examples include Salesforce (CRM), QuickBooks (Accounting), ServiceNow (ticketing), etc. The IT infrastructure in a SaaS environment resides with the SaaS company. 
• Public cloud: The main three choices for public cloud are Amazon Web Services (AWS), Microsoft Azure, and Google Cloud Platform (GCP). 

Please note that most organizations already run a combination of at least two (2) of the above. 

So how do I do the evaluation of public cloud vs on-premises?

Here’s how you do it, and please note that Roundstone Solutions can help you do this. 

First, you evaluate the operational factors. To do this, you must list out as many factors as are pertinent to your particular workload. Since these factors are not financial, you must evaluate them based on a scale of most important to least important. We use a scale of 5-1.

Rate each of the factors, in comparison to the four (4) IT infrastructure alternatives. For example, your workload might require a level of security that is only found on-premises, so you would rate the on-premises alternatives higher than the SaaS or public cloud alternatives.
Next, you evaluate the organizational factors in the same way. 

When you’re done with the operational and organizational factor ranking, you simply total the scores and see which of the IT infrastructure options offer the highest score, and their ranking.

From that point, you evaluate the financial factors, using projected real costs that you supply. When that’s done, you have a completed evaluation of all the alternatives based on what your organization’s workloads require. The cost comparison for the alternatives that pass muster in the operational and organizational factors will be clear.

At that point, your evaluation is complete, and you have a clear understanding of how the alternatives compare. This is important as you’ll now be able to explain the decision that is ultimately made.

Whatever your decision, you’ll have the ammunition to back it up your decision in concrete terms. It’ll help you make the best choice for your business and help you stick to your guns when groupthink tries to sway your mind.

Please note that we’re not vested in one option over the other; we just want our clients to make informed, educated decisions that are right for their organization.

There’s more to IT infrastructure than cost

​Public cloud vs on-premises cost is a crucial KPI for any business to consider. However, it’s only one part of the equation. Companies that only assess cost often miss other important factors that can impact their decision. 

Don’t just jump into the public cloud because everyone else is doing it. Thoroughly assess the available options for each of your workloads. If you need further guidance, don’t worry — we can help. We’ve assisted many organizations, from start-ups to large enterprises and from the public and private sectors to find the solution that makes sense and provides the best results. Contact us today to learn more.