The Cost Of Maintaining On-Prem Servers vs Cloud Storage

In a time where the necessity for secure and accessible data is vital, the shift to working from home and hybrid work setups have only heightened this need. Organisations are constantly confronted with a crucial choice – the location and method of storing their priceless data.

Cost plays a pivotal role in this decision-making process. Studies suggest that around one-third of cloud expenditure is wasted annually, highlighting the significance of carefully evaluating the financial impacts of selecting cloud storage over on-site servers.

While on-site solutions provide unmatched control and the flexibility to enhance security when required, the appeal of cloud computing, with its convenience, superior support, and minimal initial costs, is undeniable.

This blog post makes a thorough comparison of on-premise and cloud solutions, including the costs involved and the pros and cons of each option, so that we can help you make informed choices.

Factors That Affect Cloud vs. On-Premise Cost

Various factors influence an organization’s costs for on premise vs cloud IT. There is no one-size-fits-all answer to cost-effectiveness even though cloud solutions are often considered to be cheaper than on-premise solutions. Let’s explore the factors that influence both cloud and on-premises costs.

Upfront costs

One of the cost benefits linked with cloud servers is that the organisation doesn’t need to make a substantial investment in the hardware components. Instead, the organisation uses its budget more wisely by renting the hardware at a much smaller subscription-based fee. This is particularly advantageous for startups with tight budget lines. For instance, startups can fund marketing, research, or development activities instead of investing a large sum of money in expensive servers.

The same holds for server software licensing structures. For instance, in an on-premises IT environment, businesses are required to purchase their server software licences upfront, which can be costly. This is in contrast to a cloud-based infrastructure that enables organisations to utilise the server software on a subscription-based pricing model.

Hardware replacement costs

Cloud-based solutions work out less expensive than on-premises infrastructures because there’s no need to replace the hardware. This is in contrast to on-premises infrastructure, where IT teams are likely to have to replace the hardware every few years, which incurs costs. There are two main reasons why hardware replacement is unavoidable. The first reason is the advancement of technology.

As technology advances, you’ll need to update the hardware to keep up and stay competitive. The second reason is the need to prevent equipment failure. This is because older servers often become less efficient over time, leading to increased chances of failure, resulting in more downtime and lost revenue. As mentioned previously, purchasing new hardware requires significant capital investments. With a cloud-based infrastructure, you don’t have to worry about hardware replacement costs because of the subscription-based pricing model.

Pricing models

When considering the differences between cloud and on-premise servers, you need to understand the pricing models. Cloud-based infrastructures allow businesses to pay only for services consumed on a pay-as-you-go pricing model. These infrastructures can grow and shrink quickly, based on the prevailing subscriber requirements. For example, an organization that experiences a burst in traffic can scale the consumption of cloud resources upwards quickly to meet the demand.

This level of agility enables the organization to achieve real competitive advantages. In an on-premises infrastructure, this is not always the case. For example, the company must buy new hardware components if the server’s storage capacity and availability reach their limits. This not only costs money and time, but also leads to wastage, especially for businesses with seasonal traffic.

Rent and electricity costs

One of the primary reasons that cloud-based solutions are more appealing than on-premises IT infrastructure is that the organization doesn’t manage the physical equipment. As such, you don’t have to worry about the physical space for housing the servers and the associated energy costs for powering and cooling them.

With on-premises IT infrastructure, this isn’t the case. For example, depending on the number of servers the organization requires, you may be compelled to lease additional space to accommodate the hardware. Besides rent, these components will incur extra energy costs.

Maintenance costs

On-premises IT infrastructure involves physical maintenance, while in-house IT teams must ensure smooth operations. This incurs costs in terms of money and time spent on routine tasks. Cloud infrastructures reduce these expenses as CSPs manage maintenance.

Periodic upgrades

When comparing on-premise vs cloud storage, you should be aware that the former will require equipment replacement, typically within five years. This need for replacement, alongside the hurdles and risks of transferring large data volumes, can greatly influence a business’s long-term financial planning. Enterprises must also account for the yearly necessity for added capacity, complicating a potential shift to cloud services and boosting capital expenditure. On the other hand, cloud solutions present a compelling offer by removing worries about hardware obsolescence and data migration.

Cloud service providers take on the task of upkeeping and enhancing infrastructure, granting businesses access to cutting-edge technology without significant initial investments. This approach not only lowers the risk of technology becoming outdated but also provides a scalable and flexible cost framework. Operating expenses with cloud services are more foreseeable, enabling companies to adjust their resources based on actual requirements and effectively respond to evolving business needs.

Flexibility and remote working

The rise of remote working, particularly evident in 2020, has emphasised the need for businesses to provide flexible server access. Traditional on-premises servers often struggled to adapt due to networking and security limitations, usually allowing access only within the organisation’s local network or via complex and expensive VPN setups. In contrast, cloud services have emerged as a superior option, purpose-built to facilitate remote access through advanced networks, security protocols, and infrastructure.

Embracing cloud technology allows businesses to utilise a pre-built platform for remote work, eliminating the necessity for significant investments in developing in-house remote access capabilities. Cloud platforms also promote smooth remote collaboration and seamless integration with popular productivity tools, offering a scalable and adaptable solution that enhances productivity and business growth regardless of employees’ locations.

Cloud Storage

Pros of a Cloud-Based System

Discover how cloud-based systems are transforming businesses with scalability, flexibility, and cost-effectiveness.

No upfront hardware or software license costs

One of the key benefits of cloud computing is the cost savings it brings by shifting funds from large upfront hardware investments. Businesses can lease hardware, spreading costs through monthly fees. This financial shift allows strategic fund allocation. Savings from avoiding server purchases upfront can fuel growth activities like marketing and research. Redirected investments can boost returns, expanding the business and revenue streams.

The cloud model also revolutionizes server licensing. Instead of the traditional on-premises method requiring costly upfront licenses, the cloud includes licensing fees in monthly bills. This mirrors the hardware approach, offering a “rental” scenario that cuts capital outlays. This financial flexibility allows investments in growth areas, changing how tech investments support business goals.

No hardware replacements

Another major difference between cloud computing and on-premise systems is the lack of need of hardware replacement. With traditional on-premises setups, you’ll likely need to update your hardware every few years for two main reasons. Firstly, to keep up with evolving technology and remain competitive. New servers offer the latest upgrades and improved performance. Secondly, hardware replacements are done to prevent equipment failures.

Outdated servers become less reliable and are more prone to breakdowns, leading to downtime and revenue loss. However, purchasing new servers every few years can be a significant expense. Cloud services eliminate these concerns. Monthly payments replace the need for large capital investments, providing predictable costs and avoiding unexpected expenses from server failures.

The cost of IT maintenance

Maintaining on-premises infrastructure also involves IT staff. Physical hardware needs regular upkeep, requiring someone to ensure smooth operations and fix issues. With on-premises equipment, a significant portion of the IT team’s time is dedicated to these routine tasks.

Moving to the cloud eliminates these responsibilities, potentially reducing the need for a large IT department. This shift allows IT staff to focus on more impactful projects, enhancing overall technology performance and organizational efficiency.

The cost of power and electricity

One of the biggest differences between the cloud and on-premise infrastructure is that you aren’t managing physical server. This means you don’t have to worry about having space for the hardware, powering it, or cooling it. These costs are often forgotten but can add up quickly.

Depending on how many servers your business requires, you may need to rent out additional space for this hardware. And powering and cooling the infrastructure is a 24/7 task. With using cloud, you don’t have to pay these additional costs.

Pay for what you use

In the cloud environment, a key cost-saving factor is paying only for what you use. Unlike a server, where this isn’t always the case due to limited storage and availability. When you max out your server, you must buy another for expansion.

For instance, if you’re close to server capacity and face a traffic surge from a marketing promotion, you’ll need a new server. However, this leads to extra costs when traffic returns to normal post-promotion. Many growing businesses face this scenario with seasonal traffic.

Cons of a Cloud-Based System

While cloud-based systems provide numerous advantages, they also come with their own set of challenges. Let’s take a look at the cons of cloud computing.

Cloud service costs can add up quickly

One of the great things about cloud computing is the wide range of services and tools it offers, from AI to developer tools. But if not managed well, costs can quickly get out of hand. Understanding what you’re paying for is crucial to avoid surprises. Luckily, many reputable cloud providers, like our favorite, Microsoft Azure, offer tools to help manage spending.

Cloud outages can lead to downtime

When you rely on the cloud, you’re counting on the provider to keep things running smoothly. Occasionally, they might let you down with an outage. While rare, it’s a trade-off for not managing your infrastructure. Outages can impact your business financially, but fingers crossed they’re brief.

On-Premise Servers

Pros of On-Premise Servers

While cloud-based systems have their clear advantages, on-premise servers also offer benefits tailored to specific organizational needs.

Flexibility to customise hardware configurations and network setups

One significant advantage of on-premises servers is the unparalleled flexibility they offer in terms of hardware configurations and network setups. Organizations with specific, niche, or highly demanding performance requirements can select and customize their server hardware to meet these precise needs. This option allows for the optimization of performance, security, and storage capabilities tailored exactly to the operational demands and future growth plans of the business.

Additionally, on-premise environments enable companies to configure their network setups uniquely, ensuring that they can achieve the ideal balance of speed, reliability, and security. This level of customization is especially crucial for businesses with unique data processing requirements or those operating in industries subject to stringent regulatory compliance standards.

Excellent performance and low latency

On-premise servers often deliver superior performance and lower latency compared to cloud-based solutions, mainly because the servers are located closer to the business’s physical location. This proximity minimizes the distance data must travel, thereby reducing delay or latency, which is particularly crucial for applications requiring real-time processing and response. High-performance computing tasks, such as complex data analysis or processing large volumes of transactions in a short time, greatly benefit from this setup.

The direct control over the on-premise hardware also allows businesses to invest in high-specification equipment tailored to their specific needs, ensuring that the server’s performance can handle peak loads efficiently. This combination of low latency and excellent performance makes on-premise servers a preferred choice for industries where even a millisecond of delay can have significant implications, such as financial trading, real-time data analytics, and high-frequency trading platforms.

Ideal for high-speed processing and real-time data

The inherent design of on-premise servers makes them exceptionally well-suited for high-speed processing and real-time data applications. When businesses require instantaneous data analysis and decision-making, the slight delay introduced by transmitting data to and from the cloud can be a critical disadvantage. On-premise servers, housed within the organization’s own data center, ensure that data processing and retrieval are as immediate as possible, providing an edge in environments where time is of the essence.

This setup is ideal for sectors like emergency services, where every second counts, or financial institutions, where real-time data processing can significantly impact trading outcomes. The ability to process data on-site without the inherent latency of cloud-based services allows these organizations to operate more efficiently, respond more quickly to situational changes, and maintain a competitive advantage in their respective fields.

Better control and assurance

On-premise solutions offers organizations better control and assurance over their IT operations. This includes comprehensive oversight of data security, privacy, and compliance with relevant regulations. While it can be cheaper to use public cloud for sure, keeping sensitive data in-house allows companies to enforce their security protocols directly and modify them as needed without relying on external cloud providers. This level of autonomy is crucial for businesses in industries subject to stringent data protection laws, as it simplifies compliance and reduces the risk of data breaches.

Furthermore, traditional on-premise setups allow IT teams to perform immediate hardware upgrades or maintenance, ensuring that the system remains robust and highly available. This direct control and physical access to the infrastructure provide a reassurance that is often indispensable for organizations with critical, real-time operations where downtime is not an option.

Cons of On-Premise Servers

However, despite these significant advantages, on-premise servers are not without their drawbacks.

Significant upfront investment

On-premise solutions require significant upfront investment, primarily used for acquiring hardware and software essential for the organization’s operations. This upfront cost model can place a substantial financial burden on businesses, particularly for those needing high capital for other critical operations or startups with limited funding.

In contrast to cloud-based solutions where costs are predictable and spread over time, these initial expenditures for on-premises setups add up quickly when combined with continuous expenses such as maintenance, power consumption, dedicated IT support, and the need for physical storage space. This investment does not only represent a challenge in terms of capital allocation but also impacts the organization’s agility in responding to technological advancements or scaling operations efficiently.

Ongoing maintenance, updates, and management

Besides the substantial initial investment, one of the significant drawbacks of on-premise servers is the ongoing requirement for maintenance, updates, and management. These activities can be both resource-intensive and costly, demanding a dedicated IT team to ensure the infrastructure remains operational, secure, and up-to-date with the latest technological developments.

This not only includes routine hardware maintenance and software updates but also involves monitoring for and mitigating security threats, which are constantly evolving. Unlike cloud services, where the provider manages these aspects, organizations with on-premise servers must shoulder the responsibility, diverting valuable resources away from core business activities. This continuous need for comprehensive management can strain an organization’s operational efficiency and financial resources, particularly for those without extensive IT departments.

Time-consuming

The time-consuming nature of managing and maintaining on-premise servers is a significant drawback. This includes not only the initial setup and configuration of the servers but also ongoing oversight, which encompasses regular monitoring, applying security patches, and troubleshooting any issues that arise. The complexity of these tasks often necessitates a team of skilled IT professionals.

Furthermore, upgrades or expansions require considerable planning and can lead to downtime, during which services are not available to the organization. This level of time investment can be substantial, diverting attention and resources from an organization’s core operations and potentially hindering its ability to innovate or respond quickly to market changes. In an era where agility and efficiency are paramount, the time demands associated with on-premise server management can be a critical limitation.

The Security Myth

Choosing between storing your stuff in the cloud or keeping it in your own place often comes down to how safe you feel about it, which is important for any company. People usually worry that putting data “in the cloud” could be risky. But, more and more evidence shows that cloud places can actually be safer than doing it all yourself, with way better security measures. Let’s look at why.

Think of an online shop getting hacked, and all the customer info getting out there. Pretty embarrassing and expensive, right? But the shop will probably bounce back. On the other hand, if a cloud company gets hacked, it’s a big deal – it could really mess things up. This is why cloud companies go all out to make sure they’re secure.

Cloud companies have a lot at stake – their whole business relies on being secure. They hire loads of security experts, way more than most companies could. Even if your company has good security tools, the truth is, cloud services probably have better security. They invest heaps in keeping things safe, with high-tech security systems and experts looking out for any threats all the time.

In short, using the cloud means your data is in a safe place, with top-notch security that’s hard to match if you do it all on your own, especially on the same budget. Cloud services offer a strong layer of protection, with constant monitoring, advanced security, and plenty of experts to keep your data safe.

maintaining servers

The Six Key Elements That Contribute to TCO in Both Models

1. Infrastructure costs

The expenses associated with acquiring and maintaining servers, storage devices, and networking equipment can be substantial. Operating on-premises often means incurring higher costs compared to cloud-based solutions. Not only do these costs include initial investments, but they also involve ongoing maintenance. For instance, an organization may choose to operate on-premises infrastructure, sparing no expense in acquiring the required equipment. For some time, its data needs are less than its data capacity.

Yet, it continues to expend costs maintaining both the functioning and non-functioning servers. Additionally, when data needs eventually exceed capacity, the organization will invest in acquiring and integrating more servers. Cloud alternatives offer a more economical option as organizations only pay for what they use. They also don’t need to worry about acquiring and maintaining expensive hardware other than networking equipment.

2. Software and tooling

Organizations often rely on a variety of software solutions to address different needs within their IT infrastructure. However, managing a diverse set of individual software applications can lead to significant cost implications. In an on-premises environment, each software tool typically requires separate licensing, maintenance, and support costs.

As the number of individual solutions grows, so does the cumulative cost of ownership. Additionally, integrating and managing these disparate tools can become complex and time-consuming, requiring skilled IT staff and potentially leading to higher labor costs.

3. Data centre/hosting costs

Data must be stored somewhere. On-premises solutions demand physical space, either onsite or in data centres. Scaling on-premises infrastructure to accommodate business growth can lead to further costs, as additional hardware and resources need to be purchased and integrated.

There are also ongoing costs related to power consumption and regular maintenance. Add in more variable costs of physical security and backup solutions, and you can see how the organization pays significantly more over the long term.

4. Employee devices

From smartphones to laptops, employee-owned devices (BYOD) have become ubiquitous in the modern workplace. While organisations may spend less on procuring devices, this can increase costs in other areas. For example, if employees use their own devices, the organisation may need to purchase additional software licenses. Furthermore, different operating systems such as Android or iOS need to be configured to work with the organisation’s network and security settings, which can increase costs.

Fortunately, there are many ways to reduce the TCO of employee devices. One is to select the right mix of devices for your workforce carefully. Another is to invest in cloud-vendor solutions that provide mobile device management and security solutions that streamline support and security operations.

5. Data onboarding and migration

Data onboarding and migration from on-premises to a cloud-based platform can be disruptive to business operations. This is due to systems being taken temporarily offline for the transfer to take place. The longer the migration process takes, the more costly the downtime becomes. Data validation and quality assurance efforts during the migration can require additional resources, further adding to overall costs. However, cloud-based solutions are often more reliable in the long term.

They also offer better uptime than on-premises infrastructure. The increased uptime is because these solutions are not reliant on a single point of failure. In other words, if one component of the system fails, the others can pick up the slack. This redundancy ensures that businesses remain operational even in an unforeseen outage. Additionally, cloud providers often have experts dedicated to guaranteeing that their systems are always up and running.

6. Support and resources

With on-premises systems, it’s not a case of plug, play, and forget. They require constant monitoring and maintenance. Therefore, organizations need to hire or train existing staff to support these systems. Ultimately, this increases the Total Cost of Ownership (TCO) as the business incurs higher expenses in salaries and training. The time and resources spent on maintenance could have been allocated to more productive, higher-value tasks.

By contrast, cloud-based infrastructures don’t demand extensive maintenance from the user’s side and they often include support services as part of the hosting package. This not only reduces the need for in-house technical support staff but also ensures that any issues are swiftly addressed by experts, thereby minimizing downtime and enhancing operational efficiency.

Why the Benefits Outweigh any Concerns?

It is understandable that IT teams feel hesitant about leaving behind on-premises infrastructure, especially when they have already invested substantial resources into building and maintaining it. However, maintaining outdated infrastructure solely due to past investments or the company’s embedded culture may lead to even greater challenges and expenses in the long run, as these systems become more susceptible to maintenance issues.

While the transition to the cloud may seem daunting, it’s a strategic move that ultimately drives down costs and improves efficiency while enabling innovation. Waiting too long to make this shift can exacerbate the challenges posed by legacy systems and lead to staff productivity issues, inefficiencies, reduced performance, and increased costs.

How Vantage 365 Advice Can Help You?

Here at Vantage 365, we work with businesses of different sizes across various industries to provide practical and affordable solutions to your business problems. We research the latest systems and software so that our advice is balanced and considered. We pride ourselves on the high quality of service we provide to all our clients, building and maintaining long-lasting client relationships due to the consistent quality of support and advice we offer.

If your servers are due for replacement, or you are looking at creating a hybrid system to allow for remote working potential, then why not speak to us today? Our friendly and informed team here at Vantage 365 are always happy to discuss your business.

Call us on 01384 593720 or email us at hello@vantage365.co.uk and transform your business today.

FAQs

Which is cheaper on-premise or cloud cost?

Determining whether on-premise or cloud solutions are cheaper depends on several factors, including the scale of your operation, your business needs, and the level of control and flexibility you require. On-premise setups typically involve a higher initial investment in hardware, software, and infrastructure, making it appear more costly upfront. However, they can become cost-effective in the long run for organizations that need extensive customization and control over their environment.

Cloud services, on the other hand, offer a pay-as-you-go model that can significantly reduce initial costs and are ideal for businesses seeking scalability and flexibility. The trade-off includes potential ongoing operational costs that can vary based on usage. To make an informed decision, businesses should conduct a thorough cost-benefit analysis that considers both the short-term and long-term financial impacts.

How much does an on-prem server cost?

The price of an on-site server can vary widely due to factors like hardware specs, software licenses, and networking needs. A basic small business server can cost £1,000 to £3,000 for the hardware alone. Larger organizations or those needing advanced features like enhanced processing power and redundancy may face costs in the tens of thousands.

This doesn’t cover ongoing expenses like maintenance, cooling, and power. All these factors impact the total cost of ownership (TCO) and must be carefully considered when opting for an on-premises server.

Is cloud storage more expensive than local storage?

Deciding if cloud storage costs more than local storage depends on a business’s unique needs and size. For small to medium-sized companies with changing demands, cloud storage offers flexibility and scalability, often on a pay-as-you-go basis, making it cost-effective for handling sporadic data growth. However, large organizations with consistent data usage may find on-premises storage more economical in the long term, despite higher initial infrastructure costs.

Local storage cuts out ongoing subscription fees of cloud services and provides faster data access within a secure network. Yet, consider maintenance, energy use, and space requirements that can add to local storage costs over time. Evaluate the total cost of ownership (TCO) and return on investment (ROI) for both options based on your organisation’s needs.

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