Cost comparison – cloud vs on-premise 2018/19

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As companies look ahead to 2019 and where they should be investing in IT, cloud is bound to be on the agenda. But what do the latest cloud cost comparisons look like and who should be investing in cloud? How does cloud stack up against on-premise?

Ultima has recently researched the cost of cloud vs on-premise computing and found some interesting comparisons. Importantly, because of advancements in software that can be deployed, the functionality of on-premise platforms has increased drastically allowing organisations to consume on-premise IT in a similar manner to public cloud.

To allow us to compare the two offerings we looked at a similar sizing for the infrastructure (for both on-premise and cloud) as follows:

  • 600 virtual machines
  • 4 vCPUs (virtual central processing units) per virtual machine
  • 16GB RAM per virtual machine
  • 256GB storage per virtual machine

There are five different platforms that have been considered for this, each with their own benefits and pitfalls:

  • Public cloud platform based within the UK
  • Public cloud platform based within the European region
  • A modern infrastructure based on software driven server, storage and networking
  • A hyperconverged platform, where the compute and storage scale linearly together
  • A traditional IT infrastructure, a hardware driven platform that lacks flexibility

Good news

We found, even with the additional functionality all of the on-premise, that costs have dropped. The same can also be said for the cloud costs, given how new the UK platform was last year the costs here have dropped drastically. The graph shows how some costs have been changing at a far more rapid rate than others.

If you apply a different style of migration you would end up with a very different graph; the cloud becomes much more cost-efficient if you start leveraging the additional services, auto-scaling instances and rapid scaling for instance. However, these services require a much more complex, and therefore more costly, migration.

SME vs large business

For smaller businesses despite this year’s reductions the cost of running on-premise systems is still a prohibitive overhead, therefore SaaS (Software as a Service) and IaaS (Infrastructure as a Service) still work more effectively.

NB: Traditional On Premise wasn’t on 2017 costs

For those businesses needing to scale quickly there might be a need to provide bespoke applications to suit specific business use cases. The need to run these applications and build platforms to support a diverse range of applications becomes paramount.

Another important aspect of this analysis is based on a static and predictable workload, however, in the ‘real’ business world not every application is of this nature and businesses need to take this into account. Workloads that vary widely throughout their lifecycle may well end up as hybrid or fully public cloud workloads. As businesses evolve and grow in the next year there may be a need to use applications that can leverage alternative capabilities that cloud services can provide, such as machine learning, if this doesn’t exist on-premise.

Cloud vs on-premise

The research highlighted the public cloud should be used when it allows businesses to augment its on-premise capabilities. Every workload has its own characteristics and requirements and it should be based on this mix that businesses select the best option.

For example, if a business is using VDI (Virtual Desktop Infrastructure), but it is only being used between 9am-5pm in the UK, it could utilise the cloud and auto scaling to reduce the cost during the night; whilst still enabling the business to utilise the number desktops needed during the day. The other option is to re-architect your applications to take advantage of PaaS (Platform as a Service) and SaaS technologies. If this is carried out, then the costings will improve too.

Businesses using cloud services might not look to pocket these savings, but to reinvest them in order to gain a higher level of functionality within the platform. This could include software for automation and network virtualisation.

Looking ahead

Saving the best news for last, it is highly likely that these costs will continue to decrease in 2019. This is due to the increasing supply of flash drives from the new fabrication plants that have come online in 2018 and which will lessen hardware costs. This, coupled with the new competitive nature of AMD (Advanced Micro Devices) within the server market, means the costs for both on-premise and public cloud will decrease.

Increased competition in the network virtualisation world with two goliaths fighting for control (Cisco with ACI and VMWare with NSX) should also be good news for businesses looking at these types of technology.

Over the next 12 to 24 months we are also going to see a big change in how applications are built and designed. We will move away from monolithic applications into a world built on microservices which will allow businesses to take advantage of a hybrid workload which is being load-balanced across both public and private platforms.

So, what’s right for your business?

We recommend that any company considering moving to the cloud undertakes an assessment to help them plan their journey and gain senior management buy-in. A key activity within the engagement is the discovery and subsequent assessment of the existing environment and requirements. This information should be gathered through a discovery processes, including workshop discussions with business stakeholders to ensure the business requirements are identified thus allowing solutions to be identified that fit these requirements.

Once this has been done, a review process should start of the potential proposed services in line with the captured requirements to ensure compatibility and completeness. Any incompatibilities with the proposed solution should be identified at this stage. A decision can them be made as to the best approach to take whether on-premise, public cloud or a mixture of both and which solutions provider best meets your needs.

After finding the right solution and the right solutions provider, the IT team and solutions provider should produce a jointly developed strategy document which can be presented to the business. The presentation should fully explain the various options proposed, the reasons behind them and next steps. Only with such a structured approach will the business be able to reap the benefits of using the public cloud services whilst still keeping costs under control.

Matthew Beale, Datacentre Solutions Specialist, Ultima
Image Credit: Everything Possible / Shutterstock