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Investing in Cloud vs On-premise: A Comparative Study

Investing in Cloud vs On-premise: A Comparative Study
Shahram Mani - Vice President - Oracle Practice | June 12, 2017
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Extensive digitalization, increasing market demands, and the shift towards agile have compelled 21st century enterprises to adopt disruptive tech forces – and transition to Cloud processes. In fact, the growth in Cloud computing has been five times more rapid than the overall expansion of the IT sector.

According to a 2015 survey by RightScale, currently 93% of businesses are harnessing Cloud technology to boost IT efficiency. Cloud adoption can drive several pan-enterprise benefits:

  • Innovation: Build, implement, and manage next-gen applications and extend SaaS apps with custom code
  • Standardization & Efficiency: Create value, enhance productivity, and drive efficiency by streamlining workload execution
  • Scalability: Expedite organizational growth to quickly meet business demands
  • Competitive edge: Facilitate smarter and accelerated decision making, without increasing Capex spend

Enterprises must tread cautiously when incorporating Cloud-based solutions

Enterprises must tread cautiously when incorporating Cloud-based solutions – resisting the temptation to jump on the bandwagon without proper market assessment and current state evaluation. It is, therefore, vital that organizations weigh a number of parameters - like security, deployment/maintenance costs, and utilization requirements - before embracing Cloud.

Cloud migration is an easier proposition for small to medium-sized businesses (SMBs)

For instance, cloud migration is an easier proposition for small to medium-sized businesses (SMBs) - and they have been aggressively making the shift. The European SMB Cloud Service market is expected to be worth €30.1 billion by 2018, expanding at a 17% compound annual growth rate (CAGR). SMBs are taking the lead when it comes to Cloud adoption, ahead of larger organizations, as a result of two major factors –

  • Data integrity and compliance concerns are less complex as a result of the localized nature of SMBs. On the other hand, enterprises with a larger global footprint face a plethora of regulatory as well as security hurdles across geographies.
  • Smaller firms enjoy the flexibility of modifying business processes in alignment with Cloud technologies - large organizations are often averse to change as their processes are long established and monolithic.

Yet, the potential of Cloud adoption extends beyond SMBs. In fact, even smaller units have to overcome multiple roadblocks, such as budgetary constraints. If they try to build a Cloud service offering on-premise, their operational expenditure will definitely shoot up. As a result, SMBs tend to channel their attention on core competencies, focusing on services beyond the ambit of Cloud providers, like desk side support.

On the other hand, larger enterprises, in spite of having adequate resources to develop on-premise solutions, might choose not to disrupt traditional processes and systems. Instead, they choose to re-direct their capabilities towards primary business operations.

The answer to the question whether companies should invest in Cloud, or develop on-premise solutions is complex and multi-layered. Considering broader organizational goals, here is a comparative look at the two approaches –

On-Premise vs. Cloud

Top Drivers

On-Premise

Cloud

Functionality

  • Features can be incorporated as per the needs of the business
  • Applications or resources can be prioritized, based on hierarchy
  • Customization can be carried out whenever desired
  • High-level functionality, but some features might not align with business requirements.
  • In the event of any problem, redressal will be carried out irrespective of organizational hierarchy
  • Plenty of choices in terms of customization, although not necessarily business-specific

Capability

  • Resources with specialized knowledge are required to operate and maintain on premise applications
  • Service providers employ staff with niche skills, ensuring efficient operations and seamless delivery.

 

Cost

  • Investment in assets is a must, which will then be subject to wear and tear, and will gradually have to be replaced.
  • During peak periods, substantial expenses will be incurred to meet demand
  • Subscription based model is followed and can be categorized as operational expenses; further, there will be tax benefits
  • Scalability can be achieved easily and rapidly without having to install additional equipment

Maintenance

  • Slightly difficult to monitor the systems around the clock
  • In the event of a breakdown, remedial measures have to be implemented
  • Systems will be under the scanner 24 x7
  • Financially backed SLAs are provided, resulting in credit for downtime and eliminating the headaches associated with restoring services

System Management

  • Security measures have to be implemented by the organization
  • Trust is a given, since it is run from within the organization
  • The onus of ensuring compliance lies with the company
  • Security that is provided is beyond the scope of most enterprises
  • Trust has to be extended to the service provider
  • Service providers should have teams dedicated to meeting regulatory compliance

While both on-premise and Cloud systems present unique benefits and challenges, the latter seems to have an edge over the former. However, the mere assertion of this fact cannot substantially motivate Cloud migration. Implementation of Cloud computing – whether for SMBs or for larger businesses – is a complex process that has to be bolstered by future-ready planning and outcome-driven strategies.


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