What are the best metrics to use when comparing cloud to a hardware purchase?
Many of the companies we meet with are debating between purchasing a new stack of hardware or implementing an enterprise cloud infrastructure using Expedient servers, storage, security and services.
Most of these companies gather information then do a cost analysis to compare the options. Yet many compare only the new hardware cost metrics to the cost of cloud services. Are these the only cost metrics to consider?
Hardware – Companies need to compare a purchase or lease of hardware to the recurring monthly costs of a cloud solution. Major Financial Accounting Standards Board (FASB) changes to operating leases may affect the comparison.
Licensing – Enterprise cloud providers like Expedient include hypervisor licensing (VMware or Hyper-V) and operating system licensing (Windows and Linux) in the monthly fees. Companies need to consider the costs of purchasing and/or maintaining this same licensing in the hardware purchase alternative. Not to mention the time required to track and maintain compliance with these licenses.
Staffing/skills gap – Probably the most overlooked component when comparing options is the reduction in staff efforts associated with maintaining data center hardware. Industry research on hardware maintenance burden is as high as 60% of total IT staff workload. A recent study from 1E, a software lifecycle solutions provider, shows that 29% of IT professionals’ time is spent on emergencies. Repurposing scarce IT staff time to support applications, users and business requirements is often the primary reason for considering cloud, as illustrated with the Battelle for Kids case study.
Financial model – Some companies prefer capital spend, and some would rather adopt an incremental operating expense model. However, many organizations fail to consider the cost of trapped capital when they use a 3 to 5 year purchase cycle/hardware life cycle. Purchasing enough compute, memory and SAN for forecasted growth over 3 to 5 years almost guarantees unused capacity in years one and two, which is highly inefficient from an ROI perspective.
Power, cooling, physical security and data center facilities management – On premises data centers use lots of power for the equipment, plus roughly the same amount of power for the cooling required. Managing secure access, keeping the data center clean and passing audits also cost time and money. Most if not all of these cost metrics are commonly left out of cost analysis calculations.
Finally, there are a number of metrics that are difficult to quantify but often important to your organization. Risk mitigation can include lowering downtime, reducing the impact of a staff change, lowering the risk of a data breach and meeting compliance requirements. Agility can include faster spin up of resources for new projects and system upgrades. Changing IT staff skill sets to better align with the business is difficult with the high steady-state workload of a hardware purchase-based data center.
Are you considering another hardware purchase versus cloud infrastructure? Check out The Cloud Calculator to help you run a cost analysis and then contact me to discuss the metrics that make the most sense for your organization.