The perceived cost benefits of cloud computing today have many mid-sized companies considering what used to be unthinkable—allowing precious company data to reside side-by-side with that of the competition. Despite some lingering uncertainty, many enterprises look to the cloud to deliver savings and boost their bottom line—but how does the cloud compare on costs, and how much should cost matter when assessing the true value of the cloud?
When companies compare the cloud with a private, hosted option, they typically don’t view the costs associated with each in an apples-to-apples evaluation. Kevin Westendorf, CTO and VP of Technology for the Cincinnati-based cloud provider CenterGrid, aptly addresses this when he says, “We are often greeted with sticker shock upon delivering a monthly estimate for full migration IaaS, but these customers are only factoring the cost of servers and storage and not everything else a cloud package brings to the table.”
To accurately compare cloud vs. Non-cloud options, let’s take a moment and examine the individual costs associated with each choice.
TYPICAL COSTS OF NON-CLOUD BASED OPTIONS
For those preferring to build, maintain, manage and protect their environment and infrastructure (either on-premise or off) individual costs can mount quickly. Many of these costs vary depending on personal circumstances—but it’s important to consider the following when creating a private cloud.
Physical Hardware- This includes all equipment and infrastructure such as servers, cabinets, storage, switches, power distribution units, and firewalls.
Many companies fall into a never-ending cycle of buying, refreshing and maintaining this hardware in an attempt to keep pace with advances in technology. These upgrade cycles can become costly and time-consuming.
Power and Cooling- This includes the utility costs to operate an independent facility which can be staggering and remain constant year-round.
Internet Bandwidth- This service will require the continued renewal of a support contract with a provider to drive and maintain vital enterprise systems.
Backup Services- This cost includes everything involved with maintaining a backup environment plus the costly challenge of ensuring an offsite location is completely secure—certainly no small feat.
“Build Project” Time and Resources- These are all the costs involved with the actual building construction and launch of a new hosting environment. This involves the receiving and assembling of the infrastructure hardware, plus the migration of workloads from old to new systems.
Full-Time Employees- The salary costs of the FTEs needed for the build project as well as the ongoing management and maintenance of the hardware and infrastructure.
Security- Last on this list, but arguably first in importance, system security is critical yet involves costs and expertise that can prove problematic. Kevin Westendorf explains, “If you as a customer wanted to purchase the same security products used in some cloud infrastructure solutions it would require a significant financial outlay to build into your environment. For many smaller and mid-sized companies, it could prove cost-prohibitive.”
These initial costs are just for the security software licensing and not the only obstacle faced by smaller organizations. The install and configuration accrue additional costs as well as require a level of knowledge and expertise that is rarely staffed by mid-market companies. VMware NSX is a good example—this Zero Trust Security product is typically found only in the data centers of the world’s largest enterprises due to its complexity and cost.
One final often overlooked security cost—the salaries of the FTEs needed to implement, monitor and maintain the software. According to the Robert Half salary guide, a company can expect to pay over $100,000 per year (not fully-loaded cost) for a single IT security FTE.
COSTS IN THE CLOUD
Infrastructure as a Service (IaaS) Fee- This cloud service expense is charged monthly by the providing vendor. The costs depend on the individual needs of an organization, such as total usage or the volume of data storage required. The best news—as a customer you only pay for what you use in the cloud.
From a hardware perspective, there is no outlay for physical servers, cabinets, switches, or firewalls—all are included in a cloud package. Typically, security, storage, power/cooling, power distribution and Internet bandwidth are rolled in the IaaS monthly fee.
There are no extra “build project” costs or FTE salaries to pay as a cloud tenant—all activation, management, and maintenance costs are covered by the provider.
Migration- The cost of moving workloads from old systems to new exists, but typically is less due to the full support of experienced experts engaging a repeatable process. Migration is streamlined in the cloud, requiring less time and resources, thus reducing the overall cost.
Cloud computing can undoubtedly reduce many of the costs associated with infrastructure ownership, management, and maintenance but does it consistently provide the significant overall savings many enterprises seek?
According to Kevin Westendorf, a move to the cloud may or may not deliver significant financial savings for an organization—but that shouldn’t be the tipping point. “We always strive to minimize cost, but the cloud isn’t necessarily meant to serve as cost savings in delivering cheaper from an outlay perspective. If we can come out close to even on cost, we feel we are succeeding in light of all the exceptional intangible value the cloud can provide.”
THE TRUE VALUE OF THE CLOUD
The overlying benefits of the cloud go far beyond cost numbers on a spreadsheet. The cloud’s true worth lies in allowing enterprises the freedom and agility to focus on their business.
Organizations obtain no competitive advantage from buying, building, managing, maintaining and protecting IT infrastructure. The value of IT isn’t seen in this monotonous cycle, but in the creation of innovative, fully-featured applications that engage customers in exciting new ways.
The cloud provides the necessary infrastructure for these applications as a comprehensive, fully managed service—allowing your organization to channel precious resources to the value-added endeavors that accelerate business growth and differentiation in the marketplace.