In 2016, when I did my first in-depth comparison, the resulting TCOs were usually very close. Usually, the OpEx was slightly higher for the cloud TCO versus the on-prem TCO required substantial capital investment.
However, our most recent estimate was eye-opening to our client. We were assessing a green-field implementation for a Data Warehouse at a mid-sized company. Part of our assessment was to compare TCO between the different deployment options, on-prem and cloud. We fully loaded all expenses for both options, including data center expenses, networking, data transfer, storage, administrative, software subscription fees, hardware and software maintenance, depreciation, and support.
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The results were staggering. The cloud deployment TCO was over 30% less than the comparable on-prem deployment. Further, the on-prem deployment required a significant capital investment which was not required for the cloud deployment. It should be noted that in the cloud TCO we greatly over-estimated data transfer, processing, and storage costs.
Inspecting the TCO, there were three cloud features that greatly swung the:
- Disaster Recovery cost was minimal, primarily data storage and data transfer costs.
- Separating storage and compute with pay as you go compute minimized overall costs
- Ability to right-size and scale the compute environment minimized initial costs of the program.
In the past, the cloud vs on-prem decision came down to a conversation around the speed of deployment, flexibility, elasticity – that is the normal cloud advantages. Now with the movement toward PaaS and serverless options that charge based only on resources used, the cloud has become the lowest TCO option in most cases.