At Faction, we hear from organizations of all shapes and sizes that are evaluating when and how they should leverage the Cloud vs. on-premise infrastructure. There are countless things to consider within these evaluations, such as:
- which workloads are or aren’t Cloud capable
- whose job will be affected by the changes
- which Cloud provider you should use: public Cloud vs private Cloud, is a SaaS model better than an IaaS model, etc.
Inevitably, many of these decisions come down to the financial total cost of ownership (TCO) of Cloud vs. on-prem. Traditionally, the Cloud vs. on-premise financial analysis has been centered around the theory of CapEx vs. OpEx.
A common misunderstanding we often hear is that on-premise infrastructure is a CapEx investment.
In reality, buying on-premise infrastructure is both a CapEx and OpEx investment, while the Cloud is typically only an OpEx investment. In fact, we often hear things like, “I can buy my servers for $100k, why would I pay you $8k/mo? I would break even and be losing money in about a year.” Typically, this is not an accurate assessment, so let’s break it down.
In one, flat monthly Faction Cloud subscription, all of the following costs are replaced:
- Hardware Acquisition (CapEx)
- Hardware Support (CapEx)
- Colocation (OpEx)
- Power and Cooling (OpEx)
- Remote Hands (Mix)
- VMware Licensing (CapEx)
- Windows Server Licensing (CapEx)
- Engineer Travel Costs (OpEx)
- Networking Infrastructure (CapEx)
- Bandwidth (OpEx)
- Professional and Managed Services (Mix)
- 4th Year Support Renewal (CapEx)
- Labor (OpEx)
As you can see, on-premise CapEx still requires ongoing OpEx, much like the Cloud. There are a lot more CapEx investments involved in a hardware refresh beyond simply buying the servers. Furthermore, supporting an on-premise environment requires many recurring OpEx investments that are too often not taken into account when performing a TCO analysis. Everything listed above, including the VMware and Windows licensing, is included in a Faction Cloud monthly subscription fee, therefore all the expenses need to be taken into account and comparing apples to apples is needed to complete a truly comprehensive TCO analysis.
If you want to learn more about this topic and leverage the Faction TCO calculator, download our Moving from CapEx to OpEx eBook!