Which is cheaper – On Premise vs Public Cloud

Cost is a relative term, yet it is a key consideration when evaluating the cloud. Often, enterprises will cite cost savings as the top reason for adopting cloud, yet, many others will blame lack of savings for slow or no cloud adoption. Will you save money by moving workloads to the cloud? This frequently asked question is the focus of today’s post.

I will provide a high level overview of approach and key considerations when comparing on premise data centre vs. public cloud cost.

The Challenge

Very few enterprises know the true cost of applications running in their on premise data centre. The reason is, IT never had to calculate such detailed cost, yet, without knowing this cost, it will be impossible to quantify savings gained from cloud adoption.

The Criteria

There are three focus areas that we need to assess in this exercise:

• Total cost per application running in enterprises’s on-premise data centre
• Total estimated cost of running an application in a public cloud
• Additional strategic advantages an enterprise will gain from public cloud adoption in addition to savings (high availability, time to market, increased security .. etc.)

The Approach

The following are the key steps needed to calculate cost:

• On premise Data Centre Total Cost. Here we need to assess a few areas to determine overall cost and potential future savings:
  • Physical Data Centre Cost. This includes power, cooling, maintenance, rent, taxes, insurance, etc.
  • Physical Infrastructure Cost. Supporting infrastructure such as servers, storage, networking, cabling, racks, and reoccurring costs such as maintenance/support costs, etc.
  • Operational Staffing Costs. Every data centre needs a sizable operational support team. Costs for staff supporting the data centre in roles such as administrators/engineers for storage, compute, network, virtualisation, security personnel, maintenance personnel and any other personnel involved in data centre operations.
  • Training Costs. Operational teams need frequent training such as health and safety, technology training etc.
  • Application Cost. The application and the supporting technology stack needs to be assessed. This includes cost of application, database, supporting operating system license, hypervisor license, maintenance agreements, related tooling costs, and any other related software license cost.
  • Backup and Disaster Recovery Cost. Mission critical workloads need high availability and protection. We need to assess cost of replication, backup and disaster recovery software license cost. We also need to account for off-site backup site and additional DR site cost along with the cost of connectivity between primary and DR site.
  • Data Connectivity. Any data centre will have multiple internet connectivity for redundancy. The cost of the carrier circuits needs to be calculated.

• Public Cloud Cost. Calculating the cloud cost is much simpler due to the fact all major cloud service providers make available estimate calculators to model different cost scenarios fairly accurately. If IaaS is the selected platform, then selecting the right sized instances, storage type and capacity and network connectivity to on premise (and any other needed services) will provide a good cost estimate. In case a SaaS platform is selected, then the cost estimation is much simpler as it is often based on number of users and volume of resources consumed (storage, compute, database, etc)

• Additional Cloud Financial Benefits. To estimate additional financial benefits gained from moving an application to cloud, you need to have a deep understanding of the application business value. What financial value will faster time to market bring? What will an improved high availability and redundancy mean financially? Careful thought and consideration should be given to the value add of cloud per application.

Calculating data centre total cost is a complex and lengthy exercise. Yet, in my opinion, it is a must-do exercise to establish a cost baseline to use for comparison.

Do you know what your current on premise data centre cost per application is? If not, I suggest you find out as there will be cases where on premise data centre is the more financially sensible destination for certain workloads.

I hope you have found this post informative and thank you for reading.

Regards,

Nick