The benefits of cloud computing have been well cited, with a specific emphasis on the cost savings. A cloud infrastructure offers scalability, flexibility and innovation, which can often help businesses to bring down cost.

Due to this, many businesses always assume cloud computing is cheaper. And while that is true sometimes, it isn’t always the case.

In this blog, we examine the real cost of adopting a cloud infrastructure in your business, from upfront investment to ongoing costs, so you can pick the right option.

Understanding cloud deployment models_

Before we jump into the costs, it’s crucial to understand the different cloud options. These each have different cost implications.

There are three different deployment models business can leverage:

Public cloud_

Public clouds are hosted by third-party providers. They utilise shared infrastructure and operate on a pay-per-use model, making them ideal for achieving scalability and rapid deployment.

Businesses can easily expand their resources without significant upfront investments, benefiting from the flexibility and cost efficiency of the public cloud.

Private cloud_

A private cloud involves dedicated infrastructure, typically located on-premises. It offers enhanced control and security but entails higher setup and maintenance costs.

This type of cloud is best suited for regulated industries or organisations handling sensitive data, as it allows for stringent compliance and protection measures tailored to specific needs.

Hybrid cloud_

The hybrid cloud combines public and private environments, providing flexibility while introducing additional complexity. It is beneficial for organisations requiring both control and scalability, as it allows them to leverage the advantages of both cloud types.

Through hybrid cloud solutions, businesses can optimise their operations by balancing workloads across different cloud infrastructures.

We’ll dive into the specific cost implications of each type soon.

Categories of cloud costs_

When people speak about the cost of a cloud infrastructure, it’s easy to just think about the upfront cost – what you need to pay to get the technology. However, there are different categories of costs to consider, including:

• Upfront costs: Upfront costs in cloud infrastructure include expenses for migration tools, consulting services and hardware, particularly for private or hybrid cloud setups. These costs also encompass licensing fees and the initial setup required to implement the technology.
• Ongoing costs: These refer to subscription fees for various cloud services such as computing, storage and bandwidth. These also include expenses for support plans and premium features that enhance the overall functionality of the infrastructure.
• Maintenance costs: These costs involve activities like system monitoring, applying patches, conducting backups and ensuring security updates. In a private cloud, these tasks are typically managed internally, while in a public cloud, they are usually handled externally by service providers.
• Indirect costs: Indirect costs arise from situations like downtime during migration processes or outages. Additional expenses may include training and certification for staff, compliance and governance-related overheads, as well as risks associated with vendor lock-in or unexpected spikes in usage.

When calculating the real cost of adopting a cloud infrastructure, these all must be considered.

Cost breakdown by cloud deployment model_

Now we’ve examined the different types of costs to consider, let’s jump into the cost implications of each cloud deployment model. Remember, costs can vary depending on providers you use across your infrastructure – but this should give you an idea of what to expect.

Public cloud cost breakdown_

• Upfront costs: Upfront costs around the public cloud are relatively low. This is one of the core benefits of this cloud model. You will need to cover account setup fees and consultancy services if you’re using them – but that’s it.
• Ongoing costs: Ongoing costs tend to be medium, covering regular subscription fees for compute, storage, bandwidth, scalability, support plans and premium services. The benefit here is you pay for what you use, so you do have control over spending.
• Maintenance costs: Maintenance costs around the public cloud as low, as they are managed by the provider, including upgrades, security patches and backups.
• Indirect costs: These are moderate. The most significant indirect costs you may face include meeting compliance requirements (which may include regular audits to ensure the provider is meeting internal needs) and staff training. You also need to be aware of vendor lock-in, especially if the vendor raises prices or changes terms, with costs associated with switching to a cheaper provider.

Overall cost: Low to moderate, though can rise if your provider increases their costs.

Private cloud cost breakdown_

• Upfront costs: A private cloud will have high upfront costs. This is due to you needing to invest in significant hardware, licensing fees, consulting services, migration tools and setup labour to bring your infrastructure to life.
• Ongoing costs: Ongoing costs can also be high, covering fees around powering the server, cooling costs and software licensing as required. You will also need staff dedicated to running the server, so their salaries are ongoing costs.
• Maintenance costs: High, requiring dedicated IT teams for monitoring, patches, backups and security updates.
• Indirect costs: Can be high, especially if you experience downtime during maintenance. You’ll also need to cover employee training, compliance expenses and scaling for usage spikes.

Overall cost: High, due to the amount of investment and ongoing work required.

Hybrid cloud cost breakdown_

• Upfront costs: Medium to high, depending on the level of public and private cloud costs included. You can expect to cover hardware, migration tools and consulting services.
• Ongoing costs: Medium to high, as you will need to consider subscription fees for public cloud, operational costs for private cloud and integration tools.
• Maintenance costs: Medium, involving both public (managed) and private (internal) components.
• Indirect costs: High, as you need to consider migration downtime risks, governance complexity, staff training, compliance overheads and data movement costs. These can drive costs upwards, depending on how intensive they are.

Overall cost: Medium to high, depending on the specific set up you implement in your hybrid approach.

How to choose the right cloud infrastructure for your business_

Choosing the right cloud strategy is a critical decision that can significantly impact your business’s efficiency, security and bottom line. It’s not a one-size-fits-all solution, and you need to balance costs versus what is going to have the most positive impact. For example, even if the private cloud is the most expensive option, it is still worthwhile if it aligns with your needs and provides ROI.

Here are our tips for choosing the right option for your business:

1. Assess your business needs_

Start by thoroughly assessing your organisation’s specific requirements. This includes:

• Workload analysis: Identify the types of applications and data you’ll be migrating to the cloud. Are they mission-critical or less sensitive? What are their performance demands?
• Data sensitivity and compliance: Understand the level of sensitivity of your data. Highly sensitive data or data subject to strict regulations might push you towards private or hybrid cloud solutions.
• Scalability and growth: Consider your future growth projections. Do you anticipate rapid scaling or more gradual expansion? Public clouds excel at on-demand scalability, while private clouds offer more controlled, but often slower, scaling.

2. Budget and cost tolerance_

Cloud costs can be complex, so it’s essential to have a clear financial understanding.

• Capital expenditure vs. operational expenditure: Determine your preference for large upfront capital investments (typical of private cloud infrastructure) versus ongoing, pay-as-you-go operational costs (associated with public cloud services).
• Total cost of ownership (TCO): Remember to look beyond initial setup costs. Factor in ongoing maintenance, staffing, security and potential hidden fees to get a true picture of the long-term TCO.

3. IT team capabilities_

The expertise of your internal IT team plays a significant role in your cloud choice.

If your team has limited experience with infrastructure management, a public cloud provider can handle much of the underlying heavy lifting, freeing your team to focus on application development and business innovation.

Private cloud models often require more in-house expertise to manage and maintain the infrastructure. If you lack these skills, you might need to invest in training or consider managed services, which will feed into the long-term costs.

4. Industry regulations_

Certain industries face stringent regulatory and compliance requirements that influence cloud adoption. These include industries like finance, healthcare, or government. They often have strict data residency and security mandates that make private or hybrid cloud models more suitable, offering greater control over the data environment.

While public cloud providers offer numerous compliance certifications, the level of direct control over your data and infrastructure is inherently more limited compared to a private cloud.

5. Flexibility_

It’s crucial to consider how adaptable your chosen cloud strategy will be to future changes. This means understanding your long-term needs and how that aligns with the business vision.

A hybrid cloud approach offers excellent flexibility, allowing you to move workloads between private and public environments as your needs evolve. This can be particularly beneficial for businesses with unpredictable demands.

To avoid vendor lock-in and leverage the best services from different providers, you can also consider a multi-cloud strategy. This allows you to distribute your workloads across multiple public clouds, enhancing resilience and choice.

6. Use tools and trials_

It’s wise not to jump in blind to any new tool or infrastructure change. Leverage the resources available to help you make an informed decision.

Most major cloud providers offer free trials and detailed pricing calculators, so see these to experiment with services and estimate costs for your specific workloads.

Many providers also offer migration assessment tools that can analyse your current on-premises environment and recommend suitable cloud services. For example, Azure’s TCO calculator can help you simulate different cloud scenarios and understand the potential financial implications of your migration.

Azure: the secure, cost-effective public cloud platform_

Choosing the right cloud platform is crucial for mastering your infrastructure. Of course, this will depend on your needs – but in most scenarios, using a public cloud is the most cost-effective route.

Microsoft Azure is the market leader for public cloud platforms, designed for businesses seeking a secure and cost-effective infrastructure. It offers a comprehensive suite of tools designed to optimise expenditure and operational efficiency. With built-in features like Azure Cost Management and Billing, organisations can track, analyse and control their cloud spending in real-time.

Furthermore, Azure’s pay-as-you-go model ensures that you only pay for the services you use, making it particularly appealing for scaling up or down based on demand without overcommitting financially.

We’ve created a product sheet to help you understand exactly what Azure offers your business.