Apples to apples: How are you comparing cloud to on-premises IT?

Author:
Doug Theis

Every year, more organizations are considering cloud computing as an alternative to traditional on-premises server, storage and network equipment. Change events that drive cloud consideration can include normal IT hardware refresh cycles, changes in company or IT leadership, new lines of business and new applications.

How do these organizations compare cloud versus in-house both functionally and financially? Are they missing anything? Here are some key categories to consider:

Critical facilities
Many companies often forget to include the actual data center facilities in the comparison. On-premises data centers include both capital costs and operating expenses, but these costs are notoriously difficult to nail down. On-premises power costs are often ignored because they are hard to calculate and buried in the larger power bill. Maintenance and upkeep of the data center, physical security maintenance, and managing access should be included as well.

Hardware
Start with the obvious. Servers, disk storage, network and security appliances all can be replaced with equivalent cloud infrastructure. This seems to be the easiest part of the equation; however many companies use on-premises thinking and oversize cloud compute and storage requirements to cover three to five years of estimated growth. This approach ignores a fundamental benefit of cloud; pay as you grow. Cloud providers recommend including a small amount of overhead in a right-sized infrastructure that can be expanded as new applications and data growth dictate.

Licensing
Does the cloud provider include hypervisor and operating system licensing in the cost of cloud? If they do, organizations can forego VMware, Windows and Linux costs as a function of moving to the cloud. Many companies also switch to pay as you go for database licensing, security solutions, backup and disaster recovery to stay better aligned with changing business needs.

Staffing and Skills Gaps
Can you hire the right people to staff your IT group? Because of demand, many companies in local markets are having problems finding, affording, and keeping infrastructure staff. Cloud infrastructure can reduce or eliminate the critical staffing resources for managing hardware, software, patching and updates. Include calculations on the value of repurposing part or all of these FTEs to refocus on the strategic, such as applications, business requirements, or end user support. Cloud infrastructure and the support staff of the cloud provider can often fill skills gaps like security storage, server, hypervisor and operating systems that are difficult to cover completely when hiring a small number of staff IT members.

Compliance
Companies today are facing more compliance requirements based on their industry, their client’s requirements, or their vendor’s requirements. The cost of handling physical compliance of your on-premises data center facilities should be included when comparing to a cloud provider.

Uptime
It can be difficult to fairly compare uptime in cloud and on-premises alternatives. Many cloud providers delivery N+1 redundancy (two of everything) including utility power feeds, generators, UPS, air conditioning and access to telecom connections as part of their cloud offering. On-premises data centers often have one generator, but rarely more. Comparing super high uptime facilities with the mop closet that is called the data center has obvious risks. Some companies use colocation pricing to more accurately compare internal data center uptime to the uptime that cloud providers offer.

Agility
One of cloud computing’s most obvious benefits is the ability to grow quickly and incrementally. Whether it’s new lines of business, application upgrades, or mergers/acquisitions, the ability to scale quickly and pay as you grow is still difficult to achieve with on-premises IT infrastructure. It can be hard to place a dollar value on agility, but agility can be critical in fast-changing industries and marketplaces.

Interested in doing the math for your organization? To start, check out thecloudcalculator.com and the Cloud Build versus Buy calculator. If you’re looking for a more in-depth analysis, contact me.

Doug Theis is the Director of Market Strategy in Expedient’s Indianapolis market focused on engaging with and improving the regional IT community through planning, sponsoring and attending community events, facilitating IT-focused continuing education opportunities, and sharing strategies, tactics, and research to help IT professionals stay abreast of best practices and industry trends. Connect with Doug at doug.theis@expedient.com, and follow him on Twitter.

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