The downsides of the cloud and when it pays to own your servers today

For about ten years the rule was that everything goes to the cloud. Today some companies, including a few large technology ones, are moving back to their own equipment, and the reason is almost always the same: the bill. That does not mean the cloud is a mistake. It means it is not the answer to every question.

What the cloud does well

It is fair to start there, because the advantages are real.

• No initial investment. A server is available in minutes, with no purchasing, delivery or setup.
• It grows and shrinks as needed. A web shop with ten times more visits in December pays for more capacity only in December.
• Availability in several locations without your own data centres.
• Ready-made services. Databases, storage, e-mail and more, without maintaining the system underneath.
• No hardware worries. A failed disk is not your problem.

For a company just starting out, for projects with uncertain load and for services such as e-mail, the cloud is still most often the right choice.

The downsides

A cost that never stops. Your own server is bought and used for five years or more. Cloud rental is paid every month, for ever. For constant load, rental over three to five years generally exceeds the price of the equipment, often several times over.

A bill that is hard to predict. Price lists have hundreds of items. The egress fee is a particular surprise: storing data is cheap, while downloading it is charged per gigabyte. A company that wants to pull out its own data, for example to move, pays for it.

Lock-in. The more of one provider’s special services are used, the more expensive it is to move. After a few years, switching is no longer a technical decision but a project.

Changes in prices and terms. The provider sets the price list. A rise of a few dozen per cent in a licence or service happens overnight, and the alternative is a migration lasting months.

Dependence on the internet connection. If the business system is in the cloud and the link in the warehouse or plant goes down, work stops. For systems controlling machines or a warehouse in real time, latency matters too.

The data is with someone else. Where it physically is, under whose laws and who can access it are questions you need answers to, especially for personal and financial data. A provider based outside the European Union is also subject to the laws of its own country.

Security is still yours. The provider is responsible for the infrastructure. You are responsible for settings, access and data. Most cloud incidents result from misconfiguration, not from a breach of the provider.

Backup is not included. A service that runs is not the same as a copy of your data. More in the article on the 3-2-1 rule.

When your own servers pay off

The load is constant and predictable. A business system, a database, file storage and virtual servers running round the clock at the same intensity. There is no benefit from elasticity there, yet it is paid for.

There is a lot of data. Archives, drawings, video surveillance, backups. Storing tens of terabytes on your own disks is several times cheaper than renting, especially if the data is read often.

Work has to continue without the internet. Production, warehouse, cash registers.

Data must stay under your control, because of regulation, customer contracts or your own risk assessment.

There are licences that cost more in the cloud.

You have, or can contract, the knowledge for maintenance.

A comparison on an example

Take a company that needs ten virtual servers and twenty terabytes of storage, with constant load. The figures are approximate and serve to show the proportions, not as a quote.

	Cloud	Own equipment
Initial investment	0	30,000
Monthly cost	2,200	600
Total over five years	132,000	66,000

The monthly cost of own equipment includes colocation or power and cooling, the internet link, maintenance and part of an administrator’s time. The initial investment covers two servers, storage, network equipment and an uninterruptible power supply.

In this example, own equipment pays for itself in under two years and is half the price after five. With load that varies a lot or is short-lived, the calculation looks the other way round.

What your own servers require

The comparison is not fair if the other side is left out.

• An initial investment, to be paid at once or financed.
• Space, power, cooling and physical protection. The alternative is renting space in a data centre, where the equipment is yours and the building is someone else’s.
• Redundancy. One server is a single point of failure. At least two are needed, with storage that tolerates a disk failure.
• Backups at another location.
• Maintenance. Updates, monitoring and response to failure. We cover this in the article on why it matters to maintain your network.
• A replacement plan after five to seven years.

Licence costs can be reduced considerably with open source. See the article on Linux in companies.

Most often the answer is both

Most companies do not have to choose one.

• On own equipment: the business system, databases, file storage, everything that runs all the time and holds sensitive data.
• In the cloud: e-mail, the public website, an off-site backup and anything that occasionally needs a lot of capacity.

That split takes from each side what it is good at, and does not tie the company to a single provider.

How to decide

1. List what you pay today in the cloud, by service, for the last twelve months.
2. Sort the load into constant and variable.
3. Work out total cost over five years for both options, including people’s work and the cost of leaving.
4. Assess the risks. What happens when there is no internet, when the provider raises the price, when a server fails.
5. Decide part by part, not about everything at once.

We set up own servers and private cloud as part of our cloud infrastructure and backup service, and we do the same calculation when the conclusion is that the cloud should stay. If you want to know which would be cheaper in your case, get in touch.