Will moving to cloud hosting save money?

One of the first questions asked when considering moving from an on premise infrastructure to one in the cloud is cost. However this is not a simple question to answer. And more often than not it will come down to value, rather than cost. 

While cloud is sometimes positioned as more “cost-effective”, this doesn’t necessarily mean you’ll save money. It ultimately depends on what you want to achieve by moving your IT to the cloud. This often includes considerations not only in terms of monetary cost, but in terms of resource, time and user experience.

There are various reasons for considering the cloud, and all of these should be included in a business case for making the decision to move to the cloud or to stay with an on premise system.  

Why should you consider moving to the cloud? 

It could be that your current on premise servers have reached end of life, they’re slowing down to the point of impacting productivity, and the risk of failure is critical. Or you may be using a greater number of SaaS (web-based) software and applications that simply don’t need huge amounts of on site server storage.  

And then of course there is enabling a remote workforce. Cloud is certainly the easiest way to implement hybrid working, offering users a choice of working from the office or from home, or other locations such as client premises. But how does it compare cost-wise? 

On premise costs 

On premise server hardware requires capital investment – likely to run into tens of thousand pounds depending on workload requirements – which will depreciate, degrade, and ultimately require more maintenance, and eventually reach end of life (where providers no longer support out dated server systems). The decision then is whether to continue that capital investment cycle and pay upfront for new hardware.  

Consider the running costs of on premise servers: energy (power, cooling, environmental management), floor space, engineer resource (maintenance, patching and updates – all burdens on your IT team), insurance, network traffic, and all of these can represent a significant proportion of your IT spend.  

New servers will require a capital outlay which will depreciate over time, and will eventually need replacing in a few years. This is a lumpy and unpredictable budget cycle – you never know when equipment is going to fail and to what extent, or how long it will take to purchase, install and set up a brand new set of servers. What would be the financial implications on your business of an unpredicted period of downtime?  

Expanding the business and its operations, either organically or through acquisition, can increase the demand on existing equipment and require further investment to handle additional workloads. Scaling up on premise hardware requires additional budget, and needs to be planned for the long term to align with the business growth strategy. 

Cloud costs 

With a cloud infrastructure you’re effectively using someone else’s servers, albeit on a larger scale in a datacentre. It usually means that you are not responsible for the capital investment in the equipment on which your data and systems are running – this becomes the responsibility of the datacentre. As does the maintenance of the physical hardware. (The exception is a co-location option, in which case you will have to provide the hardware while the datacentre provides floor space, power, cooling and connectivity. For our purposes here, we’ll leave co-location for now). 

In terms of budgeting, cloud switches your infrastructure from capital costs to operational costs – a subscription model based on consumption. This means predictable monthly costs based on the amount of compute and data storage you need, and the number of users who need to connect to the system. It’s easy to scale up or down, adding or removing users and resources as and when you need them. It becomes easier and quicker to increase resources to manage additional workloads as your business grows.   

The cost of running the datacentre is rolled up into your monthly subscription proportionately to your usage and requirements, so you are sharing those overheads with other organisations in the datacentre. It’s worth mentioning here that just because you’re sharing datacentre resources does not mean that anyone can access your data – all connections are secure and can’t be accessed by people you haven’t given authorisation to do so. 

As for the cost of the equipment, this is also rolled up into your monthly costs. Unless you go for the co-location option mentioned earlier, the datacentre will be responsible for managing and maintaining the hardware, so if one piece of kit fails they simply move your systems over to another with significantly less interruption to your service.  

Cloud vs on premise  

Without going into the finer detail as these will vary depending on your requirements, the ongoing cost of both solutions will actually be quite similar. The key difference is the investment cycle to replace end of life servers on premise which can increase overall costs and add to the capital expenditure element of your IT budget – something you won’t have to deal with if you move to cloud.  

So if you want predictability and scalability, then cloud hosting is a great option. It’s not necessarily going to be any cheaper, but it can be more cost-effective and easier to manage.  

Performance and reliability  

The operational set up of a datacentre may not rock your world, but it’s important to know how they provide a first-class service. In addition to the hardware they provide – the servers, racks, SSD storage, RAM, CPU etc. – they also provide protections for the integrity and performance of your systems.  

• Redundancy – a system designed with duplicated components so if it fails there will be a backup (either equipment or data) 
• Security – most datacentres provide physical security to access sites, and CCTV throughout 
• Environmental management – cooling, fire suppression systems optimised for sensitive data equipment 

• Power – dedicated power into the datacentre, with diesel fueled backup generators in the event of supply interruption 
• Uptime – the guaranteed availability of your systems, other than planned outages for maintenance and updates. A 99.9% uptime SLA allows for just 1m 26s of unplanned downtime per day, or 8hrs 45m a year. But a 99.98% uptime allows for just 17s of unplanned downtime per day, or 1hr 45m a year.  

Responsibility for the above shifts from the business to the datacenter. Instead of spending time keeping things running, your internal IT resource can be deployed onto more strategic developments to support plans for business growth. 

A modern workplace 

Another big factor is the modern workplace and what users expect from the software and systems they need to do their work. At the risk of referring to the over-used phrase “post-pandemic”, businesses and their employees were forced to make fundamental changes to how they used and managed their IT – those who were already in the cloud had few problems transitioning from on site to remote working, while those who were firmly rooted in on premise IT systems had major problems providing secure remote access to a now home-based workforce. A year or so on, the expectation of users is for a more flexible approach to where and when they work, and on whichever device is most appropriate.  

This is where cloud really can provide added value.  

Being able to log on to work systems securely from any location on any device can boost productivity. No longer tied to a desktop PC, users can update files, collaborate on projects, and manage their time more effectively. But that doesn’t just mean being able to work from home. The possibilities of getting work done in different places makes workers more efficient whether they’re working from the office, from home, or other locations such as client premises.   

Having a modern IT infrastructure that is highly performant and offers flexibility in how, where and when users do their work can have a positive impact on business growth, and can set an organisation apart in a competitive talent market.  

The added value of cloud  

If we look again at the question “will I save money moving to the cloud” the answer is no. If we rephrase the question to “is cloud more cost-effective than on premise IT” then the answer is yes, it certainly can be.   

The decision making process will predominantly be driven by costs. But there are other benefits that could sway the argument for moving away from an on premise infrastructure and some genuine value to be gained from moving to the cloud. From relieving your IT team of the burden of constantly managing, maintaining and updating on premise hardware, to easier, more predictable budgeting based on actual usage, cloud can support a more agile, strategic approach to IT operations and business productivity, and provide a platform that supports forward-thinking organisations to innovate through technology.