Is cloud computing more expensive than alternatives?
This question seems to come up every year.
Yesterday, there was a thread on Twitter that again raised the question of whether public cloud is cheaper than the alternatives. I wrote about this a few years ago in the post ‘Is public cloud more or less expensive than corporate data center options?’
Yesterday’s Twitter thread was originally based on a good post by Matt Asay in InfoWorld about how ‘Cloud costs a lot of money’ by addressing cloud providers and their investment, not the consumer side. The thread quickly shifted to focus on the consumer side of the equation. So, let’s break it down.
Let’s use a tried-and-true rent versus own analogy that most can relate to in order to do the math…vehicles. Traditional corporate data centers and their related infrastructure are represented by a vehicle that we might buy. Cloud is represented by rental cars.
When a vehicle is purchased, it has a fixed cost. When a vehicle is rented, it has a variable cost that depends on the size of vehicle, length of rental, etc. Let’s assume the vehicle is the same as the one purchased but rented instead.
For the purposes of this discussion, let us assume that the vehicles are exactly the same make, model and year. When one purchases a vehicle, there is the cost of the vehicle plus maintenance. When one rents a vehicle, those costs are bundled together.
The problem is that many are still focused on the $40/day as being less expensive than $35,000. This is what early cloud marketing programmed into our brains. Unfortunately, this is comparing apples and oranges. When you net out the math, renting is far more expensive ($583/mo vs $1,200/mo). This is based on classic on-demand pricing.
Beyond pricing companies may prefer to focus spending via operational expenditures (OpEx) versus capital expenditures (CapEx). The latter often shows up as a single line item in a department’s annual budget, but eventually gets depreciated over a set period based on its useful life. This is a much more involved conversation that needs to consider the company’s financial strategy along with their cash flow statement and balance sheet.
So, does this mean that cloud is not a viable solution for enterprises because the fundamental on-demand offering is more expensive? In a word, no. There are additional variables to considering before venturing down this path.
