There are a lot of benefits in switching to cloud computing – flexibility, security, scalability – but one that is often cited is cost. Is it really cheaper to access your computing resources and collaboration apps and tools via the cloud? Short answer: yes, usually.
Some people will tell you an on-premises server is a better option. But that’s usually only more cost-effective if you have very limited needs and don’t expect your business to grow. When you look at the range of factors influencing cost, most businesses – large or small – find a financial benefit in the cloud.
Cloud computing cost factors
Low initial investment
The first cost that you don’t have with cloud computing is hardware. You’re basically renting space on a remote server and so you don’t need to buy your own. What’s more, you don’t need to invest in upfront software licences to run the server. Yes, your cloud computing fees will cover the data centre’s hardware costs but you’re just paying for what you use, and it’s not a capital investment on your budget sheet. Also, having no hardware of your own, you won’t have to maintain or upgrade that hardware in the future.
Flexibility
Part of the ‘pay-as-you-go’ approach is that if in the future your business needs change, you can increase, reduce or stop using your cloud computing capacity and the cost will change accordingly. At no point are you paying for unused capacity or unnecessary software.
Maintenance & personnel
If you have an on-premises server, you need to maintain it yourself. This usually means recruiting an IT specialist (or team of specialists, depending) or outsourcing the maintenance to an outside provider. Either way, that’s an extra cost. With cloud services, as with hardware costs, the maintenance is bundled in the overall package price. Maybe you still have an IT department but if you do, they’re not spending their time on basic maintenance tasks that can be done cheaper elsewhere.
Utility bills
Servers don’t run on fresh air. An advantage of the ‘no-hardware’ approach is you don’t see a growth in your electricity bill – you’re not powering a server, not having to cool it, and you don’t need to find space for it. Those are 24/7 savings.
Reliability
With both the cloud and an on-premises server there is always a risk of a power outage or other service interruption. However, your cloud computing data centre is likely to have more built-in redundancy and recovery measures than your server cupboard. Besides, it’s not uncommon to see cloud service level agreements that promise 99.9% uptime. With your own on-premises server, there’s no guarantee.
Setup and implementation
Put simply, cloud computing is quicker to get up and running. If you choose cloud computing, your service provider will get you started within hours (maybe even minutes!) whereas ordering, delivery, installation and configuration of an on-premises server is measured in days…maybe longer.
Tax
In terms of accountancy, cloud computing and an on-premises server are different types of expenditure. Buying hardware is a capital expense, to be depreciated over time; but cloud services are operational expenses, accounted for as costs.
Balancing the cost of cloud computing vs. a server
Which option is more cost-effective really depends on your business’s circumstances and computing needs. However, most organisations find that a cloud computing option costs them less than on-premises hardware due to the lower initial investment, the flexibility which means you’re not tied to a level of expenditure, and the lower maintenance and utility costs.
And if you’re saving money in the cloud, imagine how you could better spend that money elsewhere in your business…
If you want to know more about what cloud computing could do for your business (and what that would cost) check out our services, or call us on 1800 312 972 – we’re here to help.
