…but few understand the financial implications of transforming from an oversized but underutilized CapEx driven operational
Traditional on-premise IT is a mix of CapEx and OpEx. Capital expenditure, or CapEx, are funds used by a company to acquire or upgrade IT infrastructure, platform
I’m often told, that one of the major drawbacks on moving IT into the cloud, is the lack of transparency on the total cost, which is surprising due to the fact that every asset in Cloud Computing is priced very clearly, while the cost of
What is the true cost of on-premise IT?
Calculating the true cost of on-premise IT is a daunting and difficult task, often neglected or misinterpreted when comparing to cloud IT. This is due to a variety of different
Who can truly price an on-premise SQL database with 99.99% uptime guaranteed including backup and disaster recovery? You would have to factor in parts
The way on-premise IT is funded is also a complex part of the calculation. Often business divisions who gets funding for IT
With on-premise IT, you are punished if you purchase and provision IT with too few resources, thus the typical investment is huge (over capacitated) because it must last for 3-5 years at least, and coming back for more money every year makes you look like an idiot at capacity planning. Virtual servers are provisioned and oversized, to ensure the business doesn’t complain about performance, resulting in overprovisioned servers, that are underutilized. If a business case calculates the server cost at i.e. € 50 per VM per month, the cost is often 3-5 times more because of overprovisioning and underutilization.
Another cost factor is depreciation, where companies in technical debt, often tend to run their hardware or software renewal cycles for 4-10 years to prolong their IT platforms, hence putting the company at risk. This is most often due to lack of time, resources or funds to renew, something a cloud service provider would never risk, and thus would likely comply to
When choosing a Cloud SaaS solution i.e. Office 365, the price per user and the SLA is quite clear. Capacity and operations
Most on-premise administrators are overworked, reactive to operational incidents, and when systems fail, they either take too long to fix it, or they hire external consultants to find the root cause, while the business suffers from downtime or bad user experience. A cloud service provider delivering services most often delivers
The soft costs of on-premise IT are often overlooked as they are very difficult to put a price tag on, but
Business demands more innovation. Innovation requires the ability to try out a lot of ideas, get rapid feed-back, move forward with the best ideas and quickly kill ideas that will not work. On-premise IT often follows the traditional gated governance model. It starts with an idea, turned into a business case, then a requirement specification, a security model, a system design (with expected sizing and scale of a full-blown production platform), and then the provisioning of IT resources executed as a project in the project pipeline. The lack of dynamics and speed means that there is no room for experimentation and innovation, which in the long-term could cause a company to fall behind
On-premise IT often takes
People talk about going digital and the importance of time-to-market. There are lots of examples to be found where a company identifies an opportunity but are then too slow to get a solution to market or alternatively they cannot release new solutions fast enough. Losing months in the provisioning of on-premise IT resources or tedious manual/semi-automated test and release management processes could cost valuable time in the harsh competition for customers. The cost of time-to-market being too long could be fatal for a company and in
Most enterprises have a security function, responsible for the protection of the company’s data and assets. The security team is responsible for overseeing complex solutions with limited time to do
Cloud economics is the discipline of minimizing the cost of consuming cloud services. Because
Rightsizing is the discipline of provisioning IT resources based on the required performance and capacity typical average on-premise sizing is 40% above
Utilization optimization is the discipline of ensuring that IT resources are shutdown when not in use. Typically, less than 40% of on-premise IT is production (the rest is Development, Test, QA
Some cloud providers allow
License optimization is the discipline of ensuring the optimal
I.e. companies with Microsoft Enterprise agreements and usage rights for Windows, can save up to 43%, depending on size, when moving servers into the Azure cloud. Furthermore, cloud providers have special licensing for development and test systems further reducing cost. By evaluating existing licensing models, and applying best practice usage of hybrid use benefits and reduces cost.
Cloud Reserved Instances (RI) provide a significant discount (up to 72%) compared to On-Demand pricing and provide a capacity reservation when used in a specific availability zone.
Reservation is a commitment
When provisioning resources in PaaS services, the true dynamics of cloud can be used to your advantage. Let’s say you create a
You could scale-up and create two large instance Web Applications with load balancing and high-availability like you would on-premise, or you create one-small instance web-application that automatically scales out, and spins up new instances when
The value of true dynamic scale also minimizes cost for pre-production environments, and test-environments, that doesn’t have to consume the same resources as production, because of the built-in ability to scale dynamically.
Transformation of on-premise servers (IaaS), to in-cloud solutions based on PaaS, reduces operational cost and technical debt. Most businesses don’t need another server to patch, monitor, secure, upgrade etc., but rather need a database, a web-application or data warehouse.
By evaluating candidates for moving from infrastructure servers to platform services or software services typically reduces cost by 30%
Determining the true cost of an on-premise IT structure, and avoiding comparing apples to oranges when comparing to Cloud (because of the difference in quality, uptime-guarantees, security, flexibility etc.) is extremely complicated, and it takes a trained eye to calculate all the different aspects that
At Cloudeon we have been working with Enterprises to build business cases for more than two years, and at no time, have we not been able to prove a 40% savings compared to on-premise IT. It basically all comes down to
Let us help you build the business case for cloud, based on true cloud-economics.