I often hear people say moving to the cloud does not save money, but frequently they don’t take into account the savings for indirect costs that are hard to measure (or the benefits you get that are simply not cost-related).  For example, the cloud allows you to get started in building a solution in a matter of minutes while starting a solution on-prem can take weeks or even months.  How do you put a monetary figure on that?  Or these other benefits that are difficult to put a dollar figure on:

• Unlimited storage
• Grow hardware as demand is needed (unlimited elastic scale) and even pause (and not pay anything)
• Upgrade hardware instantly compared to weeks/months to upgrade on-prem
• Enhanced availability and reliability (i.e. data in Azure automatically has three copies). What does each hour of downtime cost your business?
• Benefit of having separation of compute and storage so don’t need to upgrade one when you only need to upgrade the other
• Pay for only what you need (Reduce hardware as demand lessons)
• Not having to guess how much hardware you need and getting too much or too little
• Getting hardware solely based on the max peak
• Ability to fail fast (cancel a project and not have to hardware left over)
• Really helpful for proof-of-concept (POC) or development projects with a known lifespan because you don’t have to re-purpose hardware afterwards
• The value of being able to incorporate more data allowing more insights into your business
• No commitment or long-term vendor lock
• Benefit from changes in the technology impacting the latest storage solutions
• More frequent updates to OS, sql server, etc
• Automatic software updates
• The cloud vendors have much higher security than anything on-prem.  You can imagine the loss of income if a vendor had a security breach, so the investment in keeping things secure is massive

As you can see, there is much more than just running numbers in an Excel spreadsheet to see how much money the cloud will save you.  But if you really needed that, Microsoft has a Total Cost of Ownership (TCO) Calculator that will estimate the cost savings you can realize by migrating your application workloads to Microsoft Azure.  You simply provide a brief description of your on-premises environment to get an instant report.

The benefits that are easier to put a dollar figure on:

• Don’t need co-location space, so cost savings (space, power, networking, etc)
• No need to manage the hardware infrastructure, reducing staff
• No up-front hardware costs or costs for hardware refresh cycles every 3-5 years
• High availability and disaster recovery done for you
• Automatic geography redundancy
• Having built-in tools (i.e. monitoring) so you don’t need to purchase 3rd-party software

Also, there are some constraints of on-premise data that go away when moving to the cloud:

• Scale constrained to on-premise procurement
• Yearly operating expense (OpEx) instead of CapEx up-front costs
• A staff of employees or consultants administering and supporting the hardware and software in place
• Expertise needed for tuning and deployment

I often tell clients that if you have your own on-premise data center, you are in the air conditioning business.  Wouldn’t you rather focus all your efforts on analyzing data?  You could also try to “save money” by doing your own accounting, but wouldn’t it make more sense to off-load that to an accounting company?  Why not also off-load the  costly, up-front investment of hardware, software, and other infrastructure, and the costs of maintaining, updating, and securing an on-premises system?

And when dealing with my favorite topic, data warehousing, a conventional on-premise data warehouse can cost millions of dollars in the following: licensing fees, hardware, and services; the time and expertise required to set up, manage, deploy, and tune the warehouse; and the costs to secure and back up the data.  All items that a cloud solution eliminates or greatly minimizes.

When estimating hardware costs for a data warehouse, consider the costs of servers, additional storage devices, firewalls, networking switches, data center space to house the hardware, a high-speed network (with redundancy) to access the data, and the power and redundant power supplies needed to keep the system up and running.  If your warehouse is mission critical then you need to also add the costs to configure a disaster recovery site, effectively doubling the cost.

When estimating software costs for a data warehouse, organizations frequently pay hundreds of thousands of dollars in software licensing fees for data warehouse software and add-on packages.  Also think about additional end users that are given access to the data warehouse, such as customers and suppliers, can significantly increase those costs.  Finally, add the ongoing cost for annual support contracts, which often comprise 20 percent of the original license cost.

Also note that an on-premises data warehouse needs specialized IT personnel to deploy and maintain the system.  This creates a potential bottleneck when issues arise and keeps responsibility for the system with the customer, not the vendor.

I’ll point out my two key favorite advantages of having a data warehousing solution in the cloud:

• The complexities and cost of capacity planning and administration such as sizing, balancing, and tuning the system, are built into the system, automated, and covered by the cost of your subscription
• By able to dynamically provision storage and compute resources on the fly to meet the demands of your changing workloads in peak and steady usage periods.  Capacity is whatever you need whenever you need it

Hopefully this blog post points out that while there can be considerable costs savings in moving to the cloud, there are so many other benefits that cost should not be the only reason to move.

More info:

How To Measure the ROI of Moving To the Cloud

Cloud migration – where are the savings?

Comparing cloud vs on-premise? Six hidden costs people always forget about

The high cost and risk of On-Premise vs. Cloud

Why Move To The Cloud? 10 Benefits Of Cloud Computing

TCO Analysis Demonstrates How Moving To The Cloud Can Save Your Company Money

5 Common Assumptions Comparing Cloud To On-Premises

5 Financial Benefits of Moving to the Cloud

IT Execs Say Cost Savings Make Cloud-Based Analytics ‘Inevitable’