Cloud Vs. On Premises: The Cost Comparison

“When it comes to infrastructure, it’s not just about building castles in the cloud or keeping all your eggs in one basket on-premises. It’s about finding the right balance for your business demands.”

Earlier enterprises had no choice but to house their computing hardware and software on-premises. But now, the advent of cloud technology has revolutionized how companies approach IT infrastructure. However, with the advantages of the cloud also come the challenges of managing and controlling costs.

Did you know that, according to IDC, total global spending on cloud services is set to surpass $1 trillion (about $3,100 per person in the US) in 2024?

With a compound annual growth rate of 15.7%, it’s clear that the cloud is not only here to stay but also rapidly growing. This growth is due to the cloud’s numerous benefits, such as scalability, flexibility, and accessibility. However, despite the popularity of the cloud, on-premises infrastructure still has its place in the business world.

But which option is more cost-effective?

The answer is not straightforward, as it depends on various factors, such as the size of your organization, the type of workload you have, and your budget.

Let’s delve into the cost differences between cloud and on-premises infrastructure, so you can make an informed decision on which option is right for your business.

On-Premises Infrastructure vs. Cloud Infrastructure: What Are They and How Do They Differ?

On-premises infrastructure is physically located within the organization’s premises. This infrastructure typically consists of servers, storage, networking equipment, and other hardware and software components required to support the organization’s IT needs.

With on-premises infrastructure, the organization has complete control over its IT environment, including security, access, and maintenance. This level of control often comes at a high cost, including the need for dedicated IT staff, hardware maintenance and upgrades, and data center space and cooling.

On the other hand, cloud infrastructure refers to an IT infrastructure hosted by a cloud service provider (CSP) and accessed over the Internet. This model offers several advantages, including lower upfront costs, scalability, and flexibility.

In this model, the CSP provides the hardware, software, and networking components required to support the organization’s IT processes.

The organization typically pays for only its services, eliminating upfront investments in hardware and software. Cloud infrastructure can also scale up or down quickly based on the organization’s requirements.

See How ACE VDI Facilitates Success In Long Run


Cloud Vs. On Premises Infrastructure: Cost Factors to Consider

The cost of cloud and on-premises IT infrastructures are subject to several factors. As such, determining which environment is more cost-effective is a complex matter.

While an on-premises IT infrastructure can be less expensive than a cloud-based solution in certain scenarios, there may also be instances where cloud-based solutions are more affordable than on-premises IT infrastructure.

Nevertheless, cloud-based solutions are generally more cost-effective than on-premises infrastructure for most companies. Hence, examining the factors affecting the price difference between these two options is crucial.

Pricing Models

The cloud-based infrastructure allows companies to choose from different pricing models based on their requirements. Many cloud service providers offer different plans per business needs so that a business experiencing high traffic on its website can quickly scale up its cloud resources to meet the demand. When the traffic subsides, the company can scale down its resources, resulting in cost savings.

However, if a company chooses to use on-premises infrastructure, it must buy physical hardware, which requires a significant upfront investment. When they need to scale up, they must buy more hardware, resulting in more expenses. Additionally, they may have unused hardware during periods of low demand, which wastes resources and money.

Operating Costs

Apart from the capital expenditure, on-premises deployment also incurs higher operating costs. These include costs associated with maintaining and upgrading the infrastructure, energy consumption, and hiring IT staff to manage the system. These costs can add up quickly and become a significant financial burden, especially for small businesses.

However, with cloud infrastructure, the operating costs are significantly lower since businesses don’t l maintenance, upgrades, energy consumption, or hiring IT staff to manage the system.

Moreover, cloud service providers typically have better security measures than most on-premises deployments. Cloud providers have teams dedicated to ensuring their infrastructure is secure and compliant with regulations. These teams ensure the infrastructure is updated with the latest security patches and monitored 24/7 for potential security breaches.

Rent and Electricity Costs

Producing physical space to house their IT infrastructure can be a significant expense for companies. Renting additional space to accommodate hardware can be especially expensive, particularly for businesses with limited budgets. Furthermore, businesses have to bear the energy costs of powering and cooling their hardware, which can be substantial.

In contrast, using cloud services eliminates these expenses, as cloud service providers are responsible for housing and maintaining the infrastructure. Cloud service providers operate large data centers optimized for power and cooling efficiency, leading to decreased energy consumption and reduced costs.

Maintenance Costs

Maintaining an on-premises IT infrastructure can be a significant expense for businesses. Businesses need dedicated IT staff to ensure their systems run smoothly, increasing salaries and benefits costs. Enterprises also need hardware maintenance, upgrades, and replacements, resulting in further expenses.

Cloud service providers look after maintenance, upgrades, and replacements as part of their service offerings. Businesses do not need dedicated IT staff, resulting in cost savings. Furthermore, cloud service providers have multiple data centers in different locations, ensuring businesses can access their data and applications, even during natural disasters or other events that can disrupt business operations


Cloud infrastructure offers a further benefit, which is its scalability. When a business utilizes an on-premises deployment, it must purchase additional hardware and software licenses to increase or decrease its resources. This process can be costly and time-intensive, particularly if the business undergoes sudden growth.

In contrast, with cloud infrastructure, businesses can readily adjust their resources to suit their evolving requirements. This scalability of cloud infrastructure enables businesses to be more flexible and promptly respond to shifts in demand, giving them an advantage over competitors who rely on on-premises solutions.


Downtime can be costly for businesses, resulting in lost productivity and revenue. With on-premises deployment, businesses ensure that the system is always up and running. This can be challenging, especially if the business needs to have the necessary expertise or resources.

On the other hand, cloud service providers have robust backup and recovery mechanisms to ensure maximum uptime for their customers. They also have redundant systems and failover mechanisms to ensure that even if one system fails, the business can still access its data and applications. This results in minimal downtime and ensures businesses can continue operating without interruptions.

Read Expert Advice: VDI Deployment – On-premises or On the Cloud

Disaster Recovery

Any computing system should have a disaster recovery plan, which is equally important for on-premises and cloud deployment. However, with on-premises deployment, businesses must subsidize to ensure effective disaster recovery, which can be costly and time-consuming, especially for small and medium-sized businesses with limited budgets.

In contrast, cloud service providers typically offer robust disaster recovery mechanisms. By having multiple data centers located in different geographical regions, cloud providers can ensure that businesses can still access their data and applications from other data centers, even if one is affected by natural disasters or other events.

Cloud vs on-premises Cost Comparison

What would you choose?

Cloud infrastructure is a more cost-effective option than on-premises deployment for businesses. Cloud eliminates large upfront investment, reduces operating costs, provides scalability, minimizes downtime, and ensures disaster recovery. The cost savings businesses can achieve by moving to the cloud can be significant, and the ROI can be substantial.

As businesses continue to grow and evolve, they must adopt modern computing solutions to help them stay competitive. Cloud computing gives businesses the agility, scalability, and cost-effectiveness they need to succeed in today’s fast-paced business environment. By leveraging the benefits of cloud infrastructure, companies can free up resources and focus on their core competencies, resulting in improved productivity, increased efficiency, and higher profits.

Leveraging the Benefits of Both Cloud and On-Premises Infrastructure with Desktop as a Service (DaaS)

Organizations have two primary options for managing their IT infrastructure: on-premises and cloud. Each has advantages and disadvantages, and the choice between them ultimately depends on an organization’s unique needs and budget.

However, with Desktops as a Service (DaaS) from Ace Cloud Hosting, organizations can leverage cloud and on-premises infrastructure benefits. Our DaaS solutions provide flexibility, scalability, and cost savings of cloud infrastructure while still offering the control and customization of on-premises infrastructure.

With DaaS, organizations can access their desktops and applications from anywhere on any device while maintaining full control over their IT environment. Our solutions are hosted on secure, reliable cloud servers with 24/7 technical support, ensuring that organizations can focus on their core business activities while leaving the IT infrastructure to us.

DaaS is ideal for organizations looking to modernize their IT infrastructure without sacrificing control, security, or performance.

Get started with us today!

About Julie Watson

Julie is a dynamic professional with over 16 years of rich experience as a VDI and Application Hosting expert. At Ace Cloud Hosting, she humanizes disruptive and emerging remote working trends to help leaders discover new and better possibilities for digital transformation and innovation by using cloud solutions with an enterprise-class security approach. Beyond work, Julie is a passionate surfer.
On the weekend, you will find her hanging out with her family or surfing around the North Shore of Oahu.

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