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The Cost Difference of Cloud Storage vs. On-Premise Servers

David Eichkorn
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In deciding where and how to store data, there are a lot of variables to consider. Often times, the most important factor of every data specialist is simple: cost. With an estimated $900 million being wasted every year with cloud storage, it’s important to weigh the costs of both cloud storage and on-premise servers to evaluate which is the better value, along with other pros and cons.

While on-premise servers allow for more control over the data and the ability to add as much security as necessary, the convenience, support, and low start-up costs of cloud storage cannot be ignored. Let’s take a closer look.

Initial Cost

Deciding between the Cloud and on-premise data storage has often been compared to the rent vs. buy determination. With the cost of hardware, power consumption and physical space needed to implement on-premise storage, the Cloud is far less of an initial financial investment, especially for businesses with smaller data needs. What’s often not considered is the ramp up time of implementing on-site data storage. It’s not uncommon for it to take months to fully integrate a new server and prepare to go live. The disruptions and labor costs can be significant.

Cloud Startup Costs
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Another factor to consider when deciding between cloud services and an on-premise system are the monthly maintenance costs. With cloud services, you are charged a set fee every month, like a subscription, that will aide in future budgeting. The provider is responsible for upgrading its technology and keeping systems up to date with the latest security protocols, upgrades and advances.

With on-premise servers, monthly costs are often limited to electricity, IT and management, but systems must be upgraded regularly to ensure optimal performance and reliability. With the variety of systems available, the cost of repairing or upgrading a server can vary considerably. If you don’t have a data manager, it will require calling in a technician at an additional cost for hardware installation. Because of the expense, it’s not uncommon to see some companies pushing their hardware beyond its recommended lifespan, which can lead to significant business risks. Not properly maintaining on-site servers could lead to costly operational downtime and loss of data if a security breach were to occur.

With a cloud service provider, server maintenance and upgrade costs fall on the service provider—not you. And the security measures taken by cloud providers are much more advanced than the majority of those with on-premise servers.

Cloud Maintenance
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A big reason the Cloud may be a cheaper data management system than an on-premise server, or vice versa, is the amount of data you need stored. While many cloud services offer free storage that range from 5GB to 15GB, organizations that need several TB or Petabytes often find cloud services to be cost prohibitive and it may ultimately be less expensive to store data on on-site data servers.

Cloud Storage
On-Premise Storage

Increasing Storage Capability

As your business scales, your need for data will scale with it. If your organization needs to increase its data storage, the Cloud is the easiest, least expensive and fastest option.

In order to store more data with on-premise servers, the equipment would need to be ordered, paid for, shipped and installed before the storage could be utilized. Add to this the labor, testing and potential downtime while making the upgrades, and the costs add up. With the Cloud, acquiring space to host more data is available instantly and seamlessly with the click of a mouse.

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Total Cost of Ownership

With so many things to consider, a total cost of ownership calculator is a great tool to help determine which data storage system is the more cost-effective option for your organization. The calculator lets you easily compare the overall cost against disk type, amount of RAM needed, storage environment and outbound bandwidth.

Ultimately, cloud systems are cheaper in start-up costs, maintenance costs and support costs; however, the exact figure depends on the amount of data needed to be stored.

Total Cost of Ownership


There is no cut-and-dried answer to which system will be most cost-effective because each organization is different and has different needs. To decide what data storage system is ultimately best for you, talk with a professional who can help you identify and prioritize your data management needs and work closely with you to develop a plan suited for your organization.

Contact an expert at Gordon Flesch Company for a free consultation to recognize and attain your data storage goals.

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