By now, it’s likely you’ve heard that using Cloud services is a cheaper option than setting-up and maintaining your own on-premises data center.
One of the reasons behind this claim is the fact that your Cloud service provider spreads the costs of their own data center operations across many clients. That’s a much less expensive option than paying the full cost of your own.
But how specifically is the Cloud cheaper? In what ways does it enable you to cut costs without sacrificing features and functionality?
Here are seven concrete ways the Cloud is cheaper than using an on-premises data center for your business.
When you have an on-premise data center, you need to buy the hardware to equip it.
Data center equipment does not come cheap. Individual components can cost thousands of dollars because, not only are they bigger, badder machines, but they typically need all the extras including processors, memory, fans, and more.
In addition, due to the ever-advancing march of computer design, every business needs to go through a hardware refresh on a regular basis.
The original cost of data center hardware is a big hit for any business to take, especially a small one. Having to pay that amount on a regular basis is a big burden.
When you move to the Cloud however, your spend on data center equipment drops to zero. Yes, you will pay for space over in your provider’s data center, but the costs are usually much lower in comparison.
When you have an on-premise data center, you need to buy the software to run on the equipment you’ve purchased.
Up front, this is a big expense because it includes not only your business software, but the operating system software for your hardware.
In addition, software evolves even more quickly than hardware. If you want to receive updates (e.g. Software Version 3.14), you typically need to pay the vendor a yearly fee to do so. And, some software upgrades, especially those to a new version number (e.g. Software Version 3.14 to Version 4) will cost you extra even if you’re signed up for updates.
In the Cloud, these software updates happen behind the scenes and are covered in your initial fees. Even if you have to pay a bit extra to move to a new version, the fact that your provider spreads the costs over all their clients drives down the expense.
When you have an on-premise data center, you need to assure that your data is backed up and then stored someplace safe.
There are plenty of companies that provide these services, but they charges are higher because they send an person to your site physically to remove new backup media and return old, ready to use again, media.
And, if you have an emergency and need to recover lost data, you’d better hope you don’t need it fast (for which services may charge you an expedited fee) or over the weekend (which is yet another extra fee).
Backing up to the Cloud can happen all day every day and you’ll never be charged for having someone visit your site. In addition, you can typically recover mission critical data anytime on your own without incurring any additional charges.
When you have an on-premise data center, you need to take care of heating, ventilation, and air conditioning.
Data rooms run hot and the equipment needs to be kept cool. All the time. 24/7/365.
The cost of doing so really adds up and you can’t cut back because that will damage your equipment incurring even more expense.
On the other hand, your service provider pays for this expense when you work in the Cloud. And, once again, they can spread the cost over their many clients, reducing the amount you need to pay.
When you have an on-premise data center, you’ll need to pay for access to the web.
While most people think of cable and DSL modems when they imagine connecting to the web, on-premises data centers are a bit more needy than that. They require big pipes between the center and the world and your ISP may charge a lot for that service.
When you work in the Cloud however, you really only need your everyday cable, DSL, or cellular connection to the web. Since the data and application resides elsewhere, you don’t need those big pipes, just your normal hookup.
When you have an on-premise data center, your electric bill is going to be much higher.
You need to power hardware, HVAC systems, and more and that power does not come cheap. In addition, you’ll need to buy, and keep charged, uninterruptable power supplies to limit downtime during an outage.
Once again, when you you work in the Cloud, your service provider is spreading the cost which means you’ll pay a lot less to your utility provider.
When you have an on-premise data center, you’re going to need people to run it.
Labor, even freelance employees, costs money and when you need specialized skills like hardware and software, those costs will be even higher.
Working in the Cloud eliminates the need for those resources. This is not however, a call to fire the entire IT team. In fact, it can be a real business advantage to redirect their skills towards using technology strategically to gain a competitive advantage.
Compare Costs with These Calculators
In order to calculate the difference in cost between an on-premises data center and Cloud services, check out these two online calculators:
- Azure TCO Calculator 
- Total Cost of Ownership Calculator 
- Understand how cloud licensing works 
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