When comparing the cost of cloud services against dedicated equipment, you’re dealing with a huge number of variables. The range of payment models is vast. Just comparing one cloud service against another is difficult.
Multiple approaches to paying for equipment are available. You can buy hardware outright, lease to buy, or get a conventional lease with no option to buy.
The closest thing to an apples-to-apples comparison is IaaS service on a remote virtual machine against a conventional lease. You’re running a computer on the cloud, with something close to the same software you’d have run in your data center. However, a big attraction of cloud migration is the chance to get away from handling all the details of IT. That’s why SaaS is so popular, but it’s harder to compare running a remote application with running a whole computer.
Let’s say that you find a point of equilibrium. You can, in this scenario, get cloud services for $500 per month or lease servers totaling $500 per month. You still have to take in other factors to get a true cost comparison.
- Hardware operating and maintenance cost. An on-premises system will consume office space, as well as electricity for running and air conditioning.
- Software costs. With cloud services, the software costs are included in what you’re billed. Using an on-premises system will require various licenses. In addition, IT staff will have to spend time managing and upgrading the software.
- Backup and disaster recovery. With a dedicated server, you have to back it up regularly, preferably offsite.
- Internet costs. You may need to upgrade your Internet service to avoid a bandwidth bottleneck with cloud services.
- Surge costs. If your cloud usage spikes, your costs could rise dramatically till it gets back to normal.
Other factors come into play when considering owning a server vs. leasing to own and conventional leasing.
When you purchase a server, you are responsible for all maintenance costs. It may fail before the end of its projected life, requiring early replacement. If nothing serious goes wrong, though, it could have resale value at the end of its term.
With a lease, you know what you’re paying, and you just lease new equipment at the end of its term. Leasing to own is more expensive, but it can be advantageous if you plan to get additional years of useful life from the hardware.