The true costs of on-premise IT – and how cloud saves you money

By Jesper Oestergaard

We all talk about moving to the Cloud … but few understand the financial implications of transforming from an oversized but underutilized CapEx driven operational model, to a consumption driven OpEx model. Some claim that moving to cloud saves money, while others comfortable with on-premise enterprise IT, claims that building and operating IT locally is much cheaper. Who is right, and who is wrong?

Traditional on-premise IT is a mix of CapEx and OpEx. Capital expenditure, or CapEx, are funds used by a company to acquire or upgrade IT infrastructure, platform and software, while OpEx is the total cost of operating the CapEx investment. In Cloud IT the method is entirely based on OpEx, because both capacity and operations is included in the service.

I’m often told, that one of the major drawbacks on moving IT into the cloud, is the lack of transparency on the total cost, which is surprising due to the fact that every asset in Cloud Computing is priced very clearly, while the cost of on premise IT is almost impossible to calculate.

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