5 (And More) Good Reasons for the Cloud Part 2: Save Costs and Increase Profits by Moving to the Cloud

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Welcome to the second part of our series of articles about many good reasons why moving to the cloud is definitely a good idea! In the first part we looked at scaling and showed that scaling in the cloud can be much easier than with on-premise instances. This second post is about a topic that numerous pop and rock stars have sung about: Money, or, more accurately, profits and costs. Because often the argument against the cloud is that it is much more expensive than on-premise solutions. Today we'll tell you why this is not true and how you can even save money in the long term with the cloud.

More profits, fewer costs

What pays off more - cloud or on-prem? Opinions differ on this point. If you only look at the monthly subscription or license costs, the cloud always seems more expensive at first. However, it only looks that way at the start. In the long term, the picture is different. One in which on-premise solutions become much less attractive (and more cost-intensive). This is mostly because the obvious "price tag" for on-premise, e.g. the license costs, are only the tip of the iceberg. For example, downtime in minutes or hours quickly costs 3x as much as a full-year cloud subscription. You can cut your IT time and resources in half by going "off-prem." This doesn't even take into account operational expenses and the cost of non-essential resources.

This is where the cloud comes into its own, because with the cloud, you always have exactly the right capacity available - whether you need extra capacity in times of peak loads or even less (like when customers and hackers are asleep). As a result, moving to the cloud can save you up to 30% annually (compared to an on-premise solution)! The cost of non-essential software licenses in the UK and US is a whopping $34 billion per year. In 2017, IT experts put the annual cost savings over on-prem at 20% in the Office 365 Trend Report.

The key to assessing what actually costs more is whether you take a short- or long-term perspective. Are you looking at just the obvious costs or the big picture, where the total cost of ownership (from the time your IT teams have to spend to the cost of new servers) also plays a role? We present five options for using the cloud to eliminate the hidden mountain of costs:

1. Reduce or eliminate the cost of major pre/outages

On average, an outage costs your business $5,600 to $9,000 per minute. Per minute! Some companies have even more to lose - for example, a major outage in 2019 cost Facebook, about $90 million. With an on-prem solution, your IT team bears the brunt of the responsibility - and so do any outages. Which, in turn, can lead to a never-ending list of consequences: lost revenue, reduced productivity, SLAs not met, overtime, having to pay employees to be on-call in case of emergencies, etc. Rather than burden your team with all of this and hope that your servers and systems can handle a major incident, you can take a different route and outsource the responsibility to your cloud provider. Atlassian, for example, guarantees 99.95% uptime - and if an incident does occur, the resources are there to fix it quickly and at no additional cost to you.

2. Time for the essentials for your IT

If you would make a list of everything your IT department has to do to manage your servers and keep them running, it would probably be very long. Performance or scheduled upgrades, patches, server replacements, VPN installations for remote access, incident management, change management, manual integrations - it goes on and on.

Moving to the cloud frees up your IT team for more important tasks than server maintenance, because all of these tasks are then handled by the cloud provider. Your (hopefully well-paid) IT professionals can then focus on valuable strategic or urgent tasks and not on whether new licenses need to be purchased. By the way, this is also the reason why 74% of companies believe that the cloud gives your IT a competitive edge!

3. Reduce operational and hardware costs

By moving to the cloud, you would save a lot of money. Some things are obvious, some may not be, so here's a list of things you'll be saving on:

Servers: Servers need to be regularly maintained/repaired and replaced on average every 3-5 years.

Server Support: In addition to the servers themselves, there are other hardware, parts, and components that need to be purchased, maintained, and replaced over and over again in an on-premise scenario - from load balancers, air conditioners and server racks to spare parts.

Software licensing or purchasing: $34 billion in unused licenses - some of which may belong to your organization. To prevent this, you need to stay on top of it: who needs what software? This can get tricky as your company grows or employees leave. In the cloud, the number of users can often be automatically determined and updated - constantly under the eye of your admins, of course.

Electricity bill: If you assume that 80% of all servers are oversized, that means that 80% of on-premise companies use more electricity than they really need - which means they get a corresponding electricity bill every month.

Building/Space: Physical servers require space - including cooling. By moving to the cloud, you reclaim that space and can use it for other things. Or you can rent out or sell the entire building when you no longer need it.

Maintenance: Server maintenance is often handled by service providers - you can save this item and delegate it to your cloud provider.

Time spent on asset management/audits: The more systems your IT team manages (including physical servers, load balancers and parts, as well as non-physical assets like software licenses and databases), the more your asset management team will need to track. That means more time, more resources, and more mental effort.

4. Reducing environmental costs

Be kind to the environment - with the cloud. And: save money! Because electricity costs money. And when you use more electricity than necessary, you pay more money than you need to. So this is doubly good news: the cloud is up to 98% more environmentally friendly and also cheaper!

5. Save on costs for scaling

The majority (80% is often assumed here) of all on-premise solutions are oversized. This means companies reserve far more processing power than they actually need. That's a huge cost factor.

The problem is simply that in every on-prem environment, your IT team always has to guess how much processing power will be needed in the future. When they get too much, it will cost you money - and you have a pile of stuff lying around that no one needs. If your IT admins make an estimation that's too low, then they have to buy more, reschedule, find interim solutions and set everything up from scratch - and that will also cost time and money. Not to mention that some things may be running more slowly for weeks or even months, and customers usually don't like that. So, if your IT team makes a wrong estimation, things can become expensive and unpleasant.

The solution: A cloud service with automatic scaling. When more users access your service, more processing power will be made available, without you having to worry about it. When the demand decreases, the processing power is also reduced, and you save costs.

So what does a cloud migration cost?

There's no universal answer to this question, but it may become clearer with a quick calculation: Let's assume that the Return of Investment (ROI) is the result of the following equation:

(Profit/Profit from investments - investments) : Investments = ROI

So when you invest for example $50,000 into a migration from on-prem to the cloud and you save $50,000 every year after the migration, then after three years (and a saving of $150,000), your calculation would look like this:

($150,000 - $50,000 = $100,000) divided by 50,000 = 2

This means that your ROI after three years would be a factor of 2 (or 200%). In the first year you would break even, but from the 2nd year you would start making a profit.

Most moves to the cloud lead to the profits increase every year. That's only logical, because you don't have to pay for physical servers, software, service providers or suppliers every year. This remains valid even if you invest more in your migration at the beginning than is recovered in the first year. Not quantifiable in numbers, but important at the work atmosphere level is also the time saved for the non-IT teams, who have faster access to new features that increase productivity, collaboration and security because you're using the cloud.

Case study: Igloo Software, Ontario, Canada

After a big outage that cost the company three times as much as a Jira Cloud subscription, Igloo Software decided to move from on-premise to the cloud. The switch brought savings in many ways; the costs of future incidents, but also time for administration or scheduled downtimes/maintenance windows. James Seddon, Senior Tools Admin, explains:

"When we managed our own Jira server, every upgrade required at least two hours of downtime, and we had to schedule it after 8 PM, which meant a late night for me, the admin. Upgrades to Bamboo and Bitbucket, which we did separately, would also each take at least two hours."

However, Igloo also saved time and money because since the move, every user has been able to configure features themselves, without help from an admin. Since then, the number of support tickets has decreased by a whopping 50% because the users can perform many admin tasks themselves.

There are many good reasons…

…why you should move to the cloud. We've now introduced two of these in our articles. Tomorrow we'll discuss speed and performance. Here, we also want to see to what extent the cloud offers advantages. So stay tuned for our next blog!

Enough good reasons?

Seibert Media is an Atlassian Premium Partner - we would be happy to support you if you now also want to move to the cloud. Just get in touch with us, we are there for you!