The transition to the cloud continues apace. Every technology firm has cloud versions of their products. When capital is tight, overall costs are increasing, and business competitors are jumping on the bandwagon, making the leap may well seem like a no-brainer.
But reality remains different from perception. According to Synergy Research Group, 40% of critical enterprise IT workloads were still taking place in on-prem data centers; the figure is expected to be 30% in 2027 — reflecting a more gradual transition than the hype might suggest.
The cloud’s benefits are well understood but making the transition successfully requires a thorough assessment of the costs and risks involved. From my experience in supply chain and procurement leadership roles, I’ve learned companies must objectively consider several factors before moving to the cloud.
1. Transition and Operating Costs
Transitioning to the cloud requires considerable time, effort, and resources. There are always surprises, such as dependencies between on-premise applications that aren’t obvious. Long-forgotten applications may still be running in background and need to be decommissioned. In fact, in-depth discovery needs to take place at the start of the process.
The cost of operating an in-house data center is easier to understand. Labor, equipment, cooling, facilities management, taxes – the costs are readily scoped and quantified. There is some regular capital investment in new equipment and the rest is operating expense.
Compared to on-premise data centers, the cost of operating in the cloud can vary significantly based on several factors. Cloud service providers charge a combination of network, storage, and computing costs. The algorithms are complicated and reflect a number of interdependencies. For instance, cloud operating costs are affected by the time of day or day of the week that different applications run; these aren’t factors in an on-premises architecture. Additionally, there may be unexpected fees or hidden charges for data transfer and other services.
Companies often don’t know the specifics of their operating modes until they are in the midst of running in the cloud and see that their costs have skyrocketed. CloudZero reports that 60% of the companies that move to the cloud encounter higher costs than they expected. While this doesn’t mean it’s a bad decision, it does mean that cloud costs can be less predictable and require thorough upfront analysis.
2. Security
When it comes to cybersecurity, there are arguments in favor of both on-prem and cloud models. On one hand, a cloud provider can allocate more resources to security than any individual company will ever be able to — particularly a small-to-medium sized firm. However, hackers target cloud service providers because the sheer volume of data residing in their systems far exceeds that of any single company’s on-premise facility. Ultimately, that investment in cybersecurity by cloud providers may not reduce your level of vulnerability.
3. Data Location
Because of regulatory considerations, some companies have restrictions on countries in which their data can be located or transferred to. But cloud providers cannot always guarantee that data will reside in a specific location; this can be problematic for government agencies and contractors. Maintaining servers in-house can result in peace-of-mind that the right protections are in place.
4. Maintaining Flexibility
In most situations, there’s no going back to the old way, even if operating in the cloud doesn’t work for your company. When moving to the cloud, you are likely switching from on-premise versions of the applications you’re using to a subscription-based model. On-premise capability is decommissioned, and you no longer have a valid license to run internally as you have been. That’s just one of the obvious impacts, and issues, to weigh before making the leap.
5. Internet Capacity
If your entire business is moving to the cloud, there must be stable, reliable internet connectivity with adequate capacity to support your business’ most demanding applications. Insufficient network capacity can lead to slow application performance, resulting in high frustration, decreased productivity and, potentially, impact on customer experience and revenue.
Final Thoughts
The five factors cited above are important considerations but shouldn’t be thought of as show-stoppers. They do, however, highlight the fact that a cloud transition isn’t necessarily a given. It needs to be carefully considered, planned, and budgeted for. It doesn’t have to be all-or-nothing; the right thing for your business may be a hybrid architecture that capitalizes on the best of the cloud and on-premise computing.
One thing is definite: The more you educate yourself and plan for the transition, the greater the chance you will take the right steps and realize a successful transition.
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