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:

  1. which workloads are or aren’t Cloud capable
  2. whose job will be affected by the changes
  3. 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!