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

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When was the last time I bought an on-prem application?  Over five years ago and I am not looking back. Having been a CIO for many years, I have seen my share of large-scale software implementations and the maintenance and upgrade overhead that comes with on-prem applications. The numbers are varied, but it’s safe to assume that 30-40% of companies have moved into the Cloud and use it as a resource for their applications and/or infrastructure.

Should you simply jump into the pool with the others?  Of course not. First off, a simple “lift and shift” of applications from on-prem into the Cloud will produce minimal benefit if any, and those may be consumed by the resources required for the move itself. That said, a careful strategy to re-engineer your applications platform into the Cloud could have significant cost savings and operational efficiencies. A very detailed TCO (Total Cost of Ownership) is required before making such a strategic decision. There are a variety of published methods for calculating TCO.  My advice is to make friends with the team in Finance and together agree on which method is best for your environment.  Then partner with Finance to do the TCO.  If it has Finance’s fingerprint on it, the credibility ranking goes real high.  

Other items to consider


With on-Prem, you typically have a large capital outlay of cash to purchase both hardware and software. This can place a strain on corporate finances and cash, which could take away from other more mission critical initiatives. In a Cloud environment, the cost is typically an OPEX amount paid and expensed monthly. This method is easier on the corporate pocketbook, and allows cash reserves to be used for more critical business initiatives and investments. Plus, you can cancel and walk away.

Implementations and those nightmare upgrades

After you purchase an on-prem application and all the hardware and staff required to implement it, be prepared to spend huge amounts of corporate cash and hold your breath for 12-24 months as you prepare to go live. And then you have those dreaded upgrade cycles. These typically cost several million dollars, take 6-12 months, and are a huge disruption to the business. This is a tremendous waste of valuable resources.

With Cloud technology, this is all avoided. I once rolled out and we had employees using it within 30 days. No hardware or software to purchase, and their future upgrades happened seamlessly over a weekend. Most employees did not even notice, which is what you want.

Hardware, Software, Support Staff, Server Rooms, Rent, Utilities

Moving to the Cloud will not eliminate these costs, but will reduce them substantially. Not to mention shorten the lead time required to roll out new technologies. The added benefit is you can use your staff resources to provide more value-added services than performing these self-hypnotic, on-prem tasks. And that data center you have….. It’s expensive! It takes up valuable floor space, heating and cooling, the gear itself, and the staff to support and maintain.

Disaster Recovery

Cloud computing does not claim to be a one-stop solution for this mission critical business service, but having your applications and data stored in the Cloud can provide a set of backup instances that are replicated in various physical locations. It certainly beats tape or disk backups, and having them trucked to that abandoned missile silo in the Midwest.


Technologists simply disagree on this one. One side touts on-prem as the bullet-proof method of choice.  Others believe Cloud is the way to go. There is no right answer.  I know of several companies who have had their on-prem systems compromised. And we all hear of the high profile Cloud hacks of the major retail, entertainment, and healthcare businesses.  Cloud providers have a vested interest in providing a high level of security for their customers.  Their livelihood depends on it. Think about it…. Would you place your corporate jewels with a provider that had received front page headlines for a high profile breach?  Of course not.

Disk space is cheap

How many times have I heard this line from vendors selling low cost storage.  Yes, disk space is inexpensive, but so are Cloud infrastructures.  Add in all the CAPEX costs and resources required to deploy a data center, and the answer becomes obvious. My last organization had a huge appetite for large amounts of storage.  A simple call to our preferred Cloud provider yielded an almost unlimited amount of storage options at very attractive prices. Those options were deployed and made available to us in minutes, not days, weeks, or months. Time is valuable and there is a huge opportunity cost as well. Your competition knows this.


As with most Cloud applications, access is easy from any mobile device.  Try doing that with your complex on-prem environment with all the multiple layers of firewalls and passwords required to gain access.


Plan your move to the Cloud with care and due diligence. The benefits could be tremendous but only with careful and thoughtful planning and strategies. Absolutely perform a TCO exercise with Finance to determine the cost/benefit. Having them in your court is strategically beneficial. Finally, pick a small pilot and go.  Failure IS an option, but fail fast and learn from the experience. In the end, your journey into the Cloud will be well worth the time and effort.

About the Author  

Scott Fenton is the Principal of Scott Fenton Consulting, LLC and is an I.T. Executive with over 30 years of experience in Fortune 500 high tech companies, including the past 10 years as a Chief Information Officer in Silicon Valley. 

His experience at companies such as Intel, HP, Tektronix, Wind River, Fujitsu, Peregrine Systems, and Precision Castparts, have provided him with an extensive international background in business systems, technology strategies, and organizational optimization to help companies reach their highest potential and financial goals. Scott has been instrumental in a variety of successful acquisitions and organizational turnarounds.

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