On-Premise Vs. The Cloud: How To Choose The Right Solution

As organizations continue to find new ways to stay connected, the trend to move to cloud services continues to rise.

Articles published May 11, 2017 by Steve Simpson

As organizations continue to find new ways to stay connected, the trend to move to cloud services continues to rise. IDG Enterprise reported that 48 percent of enterprises are moving to the cloud to replace on-premise, legacy technology, and 25 percent of total IT budgets were allocated to cloud computing in 2016. The following Microsoft Business Blog provides quality advice and information about the various cloud platforms an organization can consider to meet the future demands of their business.

Not every business has moved its IT operations to the cloud, nor should we expect that to be the case. There are legitimate reasons to adhere to the on-premises IT approach, not the least of which is the fact that it assures that your IT infrastructure and all the data in it is under your control.

Nonetheless, no IT leader today can reject the cloud out of hand. The benefits of increased functionality, flexibility, low cost, and process efficiencies simply can’t be ignored. That said, though, there are degrees of commitment to the cloud, and there are multiple cloud models to consider. You should familiarize yourself with all the options before making any decision.

The pressure to make a decision will be steady, as IT leaders are continually challenged to find answers to very reasonable questions, such as:

Is an on-premises IT approach the best long-term IT asset management framework for our shareholders?
Does such an approach favorably position the enterprise to rapidly exploit emerging tools, techniques, and technologies that might be more effective in driving innovation?
How can we retain control of our proprietary/strategic IT assets and still find ways to make our IT investments more productive year over year?

Finding the Best Approach

A continuously improving IT asset management strategy is important to the success of the business. For that reason, you should constantly ask yourself whether your on-premise approach is truly optimal.

A candid assessment of that approach should unearth some inherent less-than-optimal aspects of it, including:

Investing in technical capacity is risky: Needed computational capacity must be estimated well in advance.

When the estimates don’t match reality, some extra computational capacity goes unused, or worse, isn’t available when it’s needed.
Effectively investing in computational capacity also requires a deep understanding of projected needs, technology trends, and technical life cycles.

Keeping top technical talent is difficult: Attracting and keeping technically skilled staff is complex and expensive, and requires significant management attention.

It continually increases expense, especially in out-years.
Keeping skills current in keeping with career path growth is a difficult-to-predict expense and a never-ending management challenge.

Additionally, it can be very difficult for small to medium-sized businesses to be able to afford top technical talent, especially if there’s only room in the budget for one staff member. Finding someone that is an expert in every area of technology is next to impossible, even though that’s what most organizations want.?

Needed uptake of new technologies is inconsistent: The process of awareness, trial, adaption, and adoption of new technologies is unstructured, reactive, and slow.

IT research is usually not part of IT management expense.
For competitive purposes, business units, not the IT function, normally direct technological change.

Introducing business change is not encouraged: The modernization of legacy systems is often postponed.

Updating existing systems to make them more responsive to business needs is considered a cost instead of an opportunity business case.
The pace of making improvements in business unit processes is limited by aging applications that are expensive to change.

It is worth repeating that moving to the cloud is not an all-or-nothing proposition. A cloud approach to IT management is compatible with either retaining some on-premise IT or eliminating it entirely. Finding the right fit is a matter of assessing what will bring you the most business benefits. But a deeper understanding of cloud options is where the matchmaking process is best begun.

The Public Cloud

The public cloud is a typical starting point for many businesses’ journey to the cloud IT management option. It’s easily available to even the smallest businesses, from some of the best-known vendors. Take Microsoft Office 365, for example. The cost benefits are clear. With the traditional, on-premises deployment of the Microsoft Office suite, every employee who will use the software must have a license—a capital expense to be depreciated over time. But if the business scales back its head count, it retains those licenses that were already paid for. With the public-cloud Office 365 approach, you pay month-to-month for only the licenses you need at the time. And for most companies, that would be recorded as an operational expense, not a capital expense.

Naturally, this approach is good for cash flow. Instead of making a major purchase and depreciating it over three years, the cost is spread out.

The public cloud has a downside, of course, most notably that most of the available applications are not very customizable. If you have enhanced security or compliance requirements, for example, or the desire for more control or customization in your environment, you may want to step up to the private cloud.

The Private Cloud

Because a private cloud is dedicated solely to your company, run either by your own staff or a third party, you have more freedom for customization and can shape it to suit your needs. Upgrades can suit your timetable, which is usually not the case in the public cloud.

A private cloud is also a much more protected environment. In many cases, you don’t have any administrative-level access to the environment; you only have the ability to configure the applications that you use. Companies that need to comply with Dodd-Frank or HIPAA, for example, where very clear controls and security measures are required, often find the private cloud a much better option.

On the downside, it’s a more expensive option than the public cloud.

IaaS via the Cloud

Companies that don’t want to build and maintain a data center can turn to infrastructure-as-a-service (IaaS) offerings. Building a data center can be a very large capital expense, especially for a data center that can withstand severe weather and has several redundancies for electrical power and computational capacity. Once it’s built, the data center has to be physically secured, and it requires 24/7 staffing.

Besides all that, you have to figure out how many physical servers and virtual servers you need for the processing power necessary to operate your business. You also need storage for maintaining your important data and documents.

IaaS offerings remove the need to anticipate your needs; expansion (or contraction) is easily accomplished, with no costs incurred until the additional capacity is needed. And IaaS also allows for varying degrees of control. An organization may want its IaaS provider to replace its server room but let the organization’s own staff administer the replacement site. Others might cede administration duties to the provider, allowing them to reduce their head count or redeploy those IT workers to areas where they are more needed.

The Hybrid Cloud

Some businesses can benefit by using multiple cloud approaches. You may have a highly proprietary business application that is better kept on-premises, but you also use Office 365 in the public cloud and maintain your accounting system in the private cloud.

Your IT management team or technology adviser can help evaluate the technology you are using, build a business case for each of your cloud and on-premise applications, and determine where your systems should optimally reside. Those decisions are primarily based on security and controls, as well as on the extent of your IT team’s skills and abilities. If you have a small IT team, you may not be able to manage a data center or your accounting system in a private cloud environment. However, an IT adviser can guide you in implementing these enhanced capabilities.

Although hybrid environments can be complex, your users needn’t be overwhelmed by that, since all the complexity is behind the scenes. With single sign-on, a hybrid environment can feel to them like a single server maintained and dedicated for their needs at your site.

Listen to the Business Drivers

Several business drivers steer organizations to the cloud, but three have emerged as the most important for organizations of all sizes and in all industries:

A preference for operating expenditures over capital expenditures: As mentioned earlier, transitioning to an operating expenditure model provides more cash on hand and more financial flexibility for the business.
Compliance concerns: A business that has to meet compliance requirements can run into unwanted expenses, audits, and headaches. All those woes can be alleviated by working with a private cloud provider with demonstrated, current security and controls.
IT staffing and competencies: The technology competencies required to run a secure, reliable IT environment have become so varied and complex that no individual can do it all. Talent has become increasingly expensive and very difficult to find and keep.

Technology advances quickly, and the capabilities of the cloud are no different. With the depth of solutions currently available and the inherent flexibility of varied and combinable cloud solutions (through virtualization), there is very likely a cloud platform arrangement that will help meet the needs of your business. Task your IT management team or secure a technology adviser to help you develop a comprehensive cloud solution to align with your business goals and existing capabilities at a predictable and more optimal monthly operational (not capital) expense.