The promise of the cloud as a cost-saving solution can be compelling, but many organizations move workloads to the cloud without conducting a thorough cost comparison. The reality is that without accounting for every factor—from disaster recovery to power, cooling, and staffing—the cloud can quickly become far more expensive than anticipated.
That doesn’t mean cloud isn’t the right option for some or even most of your workloads, but it does mean you should have a solid plan in place before moving forward. A strategic evaluation of costs ensures businesses avoid unpleasant surprises and make the right decisions for their IT infrastructure.
A study from Foundry revealed that 48% of IT decision makers cited budgets and cost as a deterrent to cloud deployment this year. Of those, 51% said controlling costs was the biggest issue. Worries about cloud’s long-term costs ranked second at 49%.
THE DANGER OF OVERLOOKING TOTAL COSTS
When Jackson Laboratories evaluated the cost of moving their on-premises workloads to Microsoft Azure, they discovered it would cost $500,000 per month without disaster recovery. For that price, they calculated they could rebuild their data center every six months. This example illustrates a common pitfall: the cloud’s pay-as-you-go model sounds appealing, but it often masks hidden costs.
Don’t forget disaster recovery. Setting up reliable DR in the cloud requires constant replication and storage, which can add significant costs.
You still pay for power and cooling. While on-premises infrastructure includes these costs upfront, they often aren’t factored into cloud comparisons. Whether you use your servers or your cloud provider’s, the hardware still has baseline requirements.
Make room for monitoring and optimization. Cloud environments require ongoing monitoring and management to avoid overspending.
Be aware of business disruption. Migration to the cloud often causes downtime or performance gaps, impacting productivity. The associated costs will depend on your business, so careful analysis should be done early to ensure you understand the anticipated impacts.
Count on needing consulting and specialized expertise. Few organizations have the in-house talent to properly plan and fully manage cloud transitions, leading to high consultant fees.
Without a detailed understanding of these factors, businesses risk making decisions that undermine their financial goals.
COMPARING CLOUD AND ON-PREMISES COSTS
While cloud spending falls under operational expenditure (OpEx) and on-premises infrastructure is considered capital expenditure (CapEx), the two models must be evaluated beyond their accounting classifications. A true cost comparison must include several key steps.
- Assess both initial and ongoing costs. Cloud spending is flexible but unpredictable, while on-premises costs are fixed and more transparent over time. Work with your technology partners to understand expenditures at each stage in your migration journey.
- Prioritize your view into resource utilization. The cloud allows for rapid provisioning, but underutilized resources can silently inflate costs. On-premises systems encourage careful planning and right-sizing from the outset.
- Update your knowledge on cloud talent requirements. Cloud management requires specialized expertise that may not exist within your core IT staff, including focus areas such as optimization, monitoring, and security. On-prem solutions may rely more on established processes and internal teams.
- Know your compliance and security needs. The cost of meeting regulatory requirements, such as GDPR, HIPAA, or PCI DSS, can differ significantly between cloud and on-prem environments.
THE HIDDEN RISKS OF INCOMPLETE EVALUATIONS
Businesses that skip a comprehensive cost analysis often experience a range of unwelcome effects.
- Unbudgeted Cloud Costs: Consumption-based billing can spike unexpectedly, leaving organizations unprepared.
- Underperformance of Workloads: Misconfigurations or a lack of testing in the cloud can impact performance, especially for mission-critical systems.
- Shadow IT: Departments may spin up cloud resources without oversight, leading to cost sprawl and fragmented operations. A study commissioned by Tangoe found that Shadow IT accounted for 38% of SaaS spending.
By taking the time to evaluate workloads, costs, and long-term goals, businesses can identify which assets are best suited for the cloud and which belong on-premises.
MAKING INFORMED DECISIONS WITH A HYBRID STRATEGY
The cloud isn’t an all-or-nothing solution. Many organizations find that a hybrid approach—combining cloud flexibility with the predictability of on-premises infrastructure—offers the best of both worlds. A hybrid strategy delivers valuable benefits.
With a well-researched and thoughtfully developed hybrid approach, your business retains control. You have the ability to keep mission-critical workloads on-premises for cost predictability and security. By optimizing cloud use, you’re empowered to use cloud strategically for elastic or temporary workloads while avoiding runaway costs. Finally, you can balance costs and align your IT spending with business priorities to properly evaluate CapEx and OpEx holistically and choose how best to direct your dollars.
PROTECT WHAT POWERS YOUR BUSINESS
At CyberNorth, we specialize in helping organizations uncover the true costs of their IT infrastructure. By conducting detailed assessments, we identify inefficiencies, optimize resource allocation, and help businesses strike the right balance between cloud and on-premises solutions.
The cloud has its place, but it isn’t a one-size-fits-all solution. Protect what powers your business with a strategy built on visibility, control, and cost efficiency.
Contact CyberNorth today to ensure your infrastructure investments align with your long-term goals.
