3 min read

The true cost of cloud

One of the deciding factors in how you plan your IT infrastructure is cost. But which is more cost-effective: using public cloud services, setting up your own private cloud, using colocation services, or keeping it all on-premises? It’s the multi-million-dollar question. And today we’re going to do our best to give you an answer.

Dark clouds and a thunder storm

A quick reminder of the terms.

  • Public cloud:  Renting access to virtual machines from organisations such as AWS (Amazon), Azure (Microsoft) and Google, who own the physical hardware. Access anywhere, any time. You only pay for the bandwidth you use, and your use is near-limitless.
  • Private cloud:  Unlike public cloud, which is – as the name suggests – available to all, your private cloud system is just for you. That means you don’t have to share the hardware with anyone, giving you much greater security. It also means the cloud can be set up to precisely meet your needs, in terms of user experience, capabilities, capacity, etc. It can still be easily scaled up, but upgrading capacity will take a little longer than with public cloud.
  • Colocation:  Your hardware, but located in a multi-tenant data centre where you get the benefits of economies of scale. This reduces the cost of powering and cooling your servers. Other benefits include high-speed connectivity, much greater redundancy and resiliency, and better physical security than you would typically see in an on-premises data centre.
  • On-Prem: Your hardware in your own server room or data centre.

Ok, now we’ve established that much, let’s look at the costs. We’re going to focus on public cloud and offer some brief comparisons with private cloud. The cost of colocation is covered here.

The cost of public cloud

Public cloud services are typically run on a pay-as-you-go model (PAYG), billed monthly. Some services offer alternative types of billing where you commit to a certain amount of usage in order to earn a discounted rate. However, you can exceed your commitments if you need to, giving you the flexibility to use as much data as you need to get the job done.

There are two big advantages to this payment model – three, if you are a start-up.

How cloud can save you money:

  1. The PAYG model ensures you only pay for what you use. You’re not paying to run servers that are only in use one day a week, or continually operate below their rated capacity due to some legacy infrastructure configuration decisions. It’s a more efficient way to allocate resources.
  2. Better still, the seemingly limitless capacity of public cloud enables so-called ‘spiky’ usage. This is because public cloud is burstable – which sounds like it should be a bad thing, but is actually a positive in terms of usage. It means your system can cope with sudden surges in demand without falling over, and without you having to invest in new infrastructure. (And the last time you want your system to fall over is when it is most in demand.)
  3. For organisations not migrating to the cloud but just starting out, public cloud enables you to avoid spending thousands of pounds on new servers, which also need powering and cooling. The initial layout and monthly utilities bills are replaced with one monthly bill for cloud.

How cloud can cost you money

This PAYG structure, however, is also one of the big disadvantages of public cloud. If your usage is unpredictable, then so is your bill. It might be that you have a big project that needs extra capacity, or maybe your customers are suddenly using your services in a different way; it might even be that someone has made a mistake somewhere. There are lots of reasons why your usage might fluctuate unexpectedly. The trouble is, it’s difficult to budget around unknown quantities – just ask your CFO. You might find them crying over the latest invoice.

Moreover, this burstable billing can work out to be significantly more expensive than the same usage in your own data centres. Remember the story of DropBox and their $75 million saving when they moved 90% of their infrastructure away from AWS and into their own data centres?

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Grey skies and silver linings

So, on the one hand you have incredible flexibility and – if your usage is stable, or not too high – a low initial investment. There’s no need to pay for hardware and everything that entails; that burden falls to someone else. On the other hand, you have unpredictable costs that have the potential to spiral out of control.

You might be wondering, could I just give it a try and see how we get on? Well, you can... Most public cloud services operate on a rolling contract, so you could technically get out at any time. But there’s a caveat. Migrating to and from the cloud is not just a click-of-a-button type thing. It’s a whole lot of work. And herein lies the other big disadvantage of public cloud services: You might find yourself locked in, simply through the fact that the time, effort and money involved in extracting yourself from the cloud makes it impractical.

Different spaces for different operations

How do you feel now? Paralysed by indecision? It can be daunting to figure out the best home for your IT infrastructure. But perhaps it is better to think of it in the same way you think about your actual home. First of all, you have different rooms for different activities, just like you can choose different options (public cloud, private cloud, colocation or on-prem) for your different workloads. It doesn’t make sense to sleep in your kitchen, or cook in your bedroom. As people have come to realise in the last 5 years, just because cloud is for everyone, doesn’t mean it is for everything.

Secondly, if you can afford a mortgage, you should get one. If you can’t, renting is your best option. By which I mean, if you have the capital to invest in private cloud from the get-go, it will almost certainly be the cheaper and simpler option in the long run. Yes, there are upfront costs. No, it is not burstable in the same way the public cloud is. But it will be designed to be just right for you. Which brings me nicely to my third point: when most people buy a house, they buy based on their typical usage right now but with an eye for what they might need it for in the future. Is there potential to extend? Is there a spare room for guests? You get that flexibility with private cloud. You can scale up as your needs evolve. You don’t need to rent a mansion on the basis you occasionally have parties.

Lifetime costs, long-term value

Whatever your decision on which workload belongs where, it is wise to think in the long-term – and to plan for getting out of your public cloud setup at the same time as you get into it. For most evolving and expanding organisations, it is unwise to think of public cloud as your ‘forever home’. The total lifecycle costs are just too high.

Private cloud, on the other hand, offers the same easy access, similar levels of flexibility (albeit less instantaneous), and the added benefits of increased security and customization. Alternatively, if you are happy to continue owning and managing your own IT infrastructure, but want the cost-benefits of the data centre, you might find a happier home with colocation, or even a Hybrid IT solution where you can have the best of both worlds. Whatever you choose, or if you're struggling to decide, get in touch and we can talk through your options to figure out the most cost-effective home for your IT infrastructure.

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