How do you compare the total cost of ownership (TCO) of cloud vs on-premise servers?

TCO is per IT service (workload), and it is not per resources such as servers, network, databases, etc. TCO of an IT Service is caluclated based on short and long duration depending on the ownership duration of the IT service. TCO is always delivred in cost indexes, and these indexes are relevant to financial groups, Management, and vendors. The financial group use these indexes to estimate IT Technology current and future cost, IT Operations Budgets, and orchestrate optimizations initiatives. The TCO includes, Hosting platforms, Networks, Storages, databases, integration (API Management, Queus, etc.), licesnsing, Operations costs (backups, monitoring, etc), Security costs (security devices, security monitoring,etc.) , Staffing, etc.

TCO- Total cost of ownership is purely maths. One IT leader should know movable/immovable assets gets invested for that particular business and how much cost spent for those movable/immovable assets sums up to TCO. For that TCO for 1 year how much ROI we brought is proft/loss.

If you see the TCO Of Servers alone, it will mislead and will not help for the decision making and getting the right number post the investment.. Holistically has to be identified including cost of procurement, maintenance, manpower resources cost, power / cooling, physical security aspects, certification & compliance, cost of licences, deployment cost & lead time etc.. so it is the exercise with the acumen of engineering, Operational and financial aspects required.

To compare the Total Cost of Ownership (TCO) of cloud vs. on-premise servers, assess both business and technical aspects. From a business standpoint, cloud offers lower upfront costs (OpEx) but ongoing expenses, while on-premise requires significant CapEx for hardware, with predictable long-term costs. Technically, cloud provides scalability and flexibility, reducing over-provisioning, while on-premise offers more control but higher maintenance costs. Hidden costs like migration, training, and security compliance must be considered. Using tools like AWS or Azure TCO calculators helps ensure a precise and balanced comparison based on needs.

Data egress fees are charged by cloud service providers for transferring data out of their networks, such as when retrieving data from storage or accessing resources located in different regions or availability zones. These costs can add up significantly, especially for organizations with high data transfer requirements or complex network architectures. Therefore, it's essential to factor in data egress fees when calculating the TCO of cloud servers to ensure a comprehensive analysis of expenses.

Avoid being misled by silo calculations (cloud and on-prem independently), it's necessary always to consider it as a decision point to choose between on-prem or cloud. For Cloud Storage specifically, we need to consider extra factors that directly or indirectly are affecting TCO, e.g. the amount of data, total period of use, managed service, end-of-life, cost structure (data transfer cost, migration cost, ...), and the other factors which are impacting the decision point indirectly, e.g. Security, Scalability, Reliability, Accessibility, Enabling DX, Leveraging New Techs, Enhancing Business Agility

This point is highlighted in the on-prem servers but should also be considered here: - staffing costs (administrators, technicians, and engineers) The cloud does not operate itself. Especially when managing sophisticated applications (highlighted business sensitive information which needs extra security controls!) it is imperative to have properly trained staff which cannot be excluded here.

Upfront Costs: Consider one-time expenses like migration fees, data transfer for initial setup, and potential consulting costs. Ongoing Costs: Analyze cloud provider's server instance pricing based on chosen configuration (CPU, RAM, storage). Factor in data storage costs, network egress fees, and software licenses. Operational Costs: Estimate costs for managing the cloud environment, including server patching, backups, and potential managed service fees. Hidden Costs: Don't forget potential data egress charges for transferring data out of the cloud, unexpected resource usage spikes, and premium support fees.

Securing on-premise servers involves implementing measures such as access control systems, surveillance cameras, alarms, and physical barriers to prevent unauthorized access or tampering. These security measures incur costs for equipment, installation, maintenance, and monitoring. Additionally, organizations may need to invest in security audits, compliance certifications, and insurance to mitigate risks associated with physical breaches or theft of on-premise server hardware. Considering the expenses associated with physical security is essential for accurately assessing the total cost of ownership for on-premise servers.

Big topic ! My view as follows ... choosing between cloud and on-premise servers hinges on initial cost vs. long-term value. Cloud offers low upfront costs and easy scalability, ideal for flexibility and growth. On-premise requires higher initial investment but can lead to lower ongoing expenses, suited for businesses with the capacity for self-management. Ultimately, the decision should align with your business' specific needs and growth strategy.

Calculating the Total Cost of Ownership (TCO) for on-premise servers involves evaluating all costs associated with the purchase, deployment, operation, and maintenance of the servers over their expected lifespan. Here’s some steps to help you to calculate TCO: 1. Capital Expenditures (CapEx) Hardware Costs Software Costs Initial Setup Costs 2. Operational Expenditures (OpEx) Power and Cooling Maintenance and Support Staff Costs Security Insurance 3. Indirect Costs Downtime Depreciation The TCO for on-premise servers includes both upfront and ongoing costs. By identifying and summing these costs, you can gain a comprehensive understanding of the financial impact over the servers' expected lifespan.

Capital Expenditures (CAPEX): Hardware costs (servers, storage, networking equipment) Software licenses (operating systems, applications) Initial setup and configuration costs Operational Expenditures (OPEX): Hardware maintenance and repairs Software maintenance and upgrades Electricity costs for powering servers and cooling systems IT staff salaries for management and support Data center space rental or ownership costs Security software and licensing Disaster recovery and backup solutions

Ideally, if the TCO is to be compared between cloud and on-prem no matter how fine you analyse the figures will be argumentative. For any medium to large scale IT landscape this comparison will only make sense if one can live with the fact that planned Cloud Transformation itself will cost you some time and may derail you from budgets if not considered. However, you can still prepare some estimates based on what is your TCO for On-Prem today and what will be your TCO after you have moved to cloud opting for all sorts of lucrative discounts that you get by commitment to cloud compute and storage (reservation). Again this will be a rough estimate.

I tend to disagree that Cloud servers are more secure. Securing cloud servers and the data is responsibility of the customer. Generalization cannot be made that Cloud is more secure. It is a fact that some customers are risk averse and that is their key reason to not move to the cloud due to security concerns. One area where cloud TCO leads hands down is in the area of new features and capabilities along with resiliency options. To build equivalent capabilities and master these on premise a lot of automation, technical expertise and investment would be required.

TCO (Total Cost of Ownership) goes beyond upfront costs. Here's how to compare cloud vs. on-premise: Cloud: Lower upfront costs, variable expenses based on usage, managed services reduce operational overhead. On-Premise: High upfront costs, fixed costs, ongoing IT staff needed for management and maintenance. Consider factors like: Scalability: Cloud scales dynamically for changing needs, on-premise requires upfront capacity planning. Security: Both options require security investment, cloud providers offer robust security features. Expertise: Cloud frees up internal IT resources, on-premise requires dedicated IT expertise. Cloud often offers lower TCO due to reduced upfront costs, flexibility, and managed services.

For anyone being introduced to the cloud vs on-prem TCO, please note that this article specifically highlights *server* costs. Storage costs are not considered here at all and are an aspect of "cloud" vs "on-prem" which cannot be ignored.

Evaluating the total cost of ownership (TCO) between cloud and on-premise servers entails examining aspects like initial expenses, ongoing operational costs, scalability, maintenance responsibilities, security measures, reliability, customization options, data transfer and bandwidth expenses, licensing fees, and cost predictability. While on-premise solutions may demand significant upfront investments and provide complete customization, cloud solutions generally feature lower initial costs, adaptable scalability, and delegated maintenance. Organizations should consider their unique requirements and attributes when determining the most economically viable solution.

Total Cost of Ownership is not the only factor to consider when comparing cloud and on-premise alternatives. Other factors (all of which have some cost implications) to consider include: - Boundary of infrastructure management responsibilities. - Backup, disaster recovery, data recovery , data protection (possibly data location, e.g. only within the EU/ UK area), etc. - Sensitivity of the services being utilised. - Amount of remote verses on-site access. - Ability to adapt server specifications to meet 'real time' requirements. - Patch management responsibilities. - Monitoring responsibilities. - Recovery response capabilities and time, etc.