Cloud Computing: On-premise Vs Cloud – a financial comparison

Your Cloud Works

IT Security & Support Specialist for Small and Medium Businesses


Cloud Computing, the rental of computing power and storage space on a pay as you go basis. Rather than having software and servers situated locally (on-premise) users login to their desktop through a web-browser to access all applications and data, within a secure environment.

Among the host of benefits Cloud Computing offers, you will often hear IT professionals talking about how it saves businesses money. This is correct for the majority of organisations. But let’s take a look at how and why substantial savings are achieved, in comparison to a traditional on-premise solution.

ABC Ltd, a small-to-medium sized manufacturing company, is in need of a complete IT refresh. The business employs 5 members of staff, with an average salary of £15,000, and their annual turnover is £750,000. The business owner is considering Cloud Computing, with the need to support 6 desktops, 2 printers and 3 servers.

If the business was to continue with an on-premise solution it would incur the following costs over a 6 year period.


The table shows the TCO of ABC Ltd continuing to manage their servers on-premise, now let’s look at the alternative option, the Cloud.


As you can see, the Cloud solution reduces the number of factors that incur costs. A significant reduction can be seen on the capital expenditure at the beginning of the 6 year period, as well as eradicating it between years 4 and 5. Over the 6 years, this has already provided ABC Ltd a ROI of £28,708, but it doesn’t end there.

There are many other benefits associated with Cloud Computing, some of which provide additional, albeit indirect, savings. For example, increased financial flexibility; the Cloud solution will allow ABC Ltd to convert previous IT related capex to opex, easing their cash flow, allowing them to re-allocate the cash to other areas of the business to help growth. The solution is also charged, similar to that of a utility, meaning that ABC Ltd only have to pay for what they need, and increase or decrease as necessary, as opposed to buying and maintaining more than required to accommodate for future growth, allowing for only 10% of a typical on-premise spend over 6 years, this saves an additional £2,401 per annum.

Cloud Computing also offers truly useable remote working opportunities, allowing users to be able to work anywhere, anytime, and on any device, increasing productivity. Rapid adoption of new technologies, as and when the business requires, results in ABC Ltd being a technologically advanced organisation, giving them a vital source of a competitive advantage. At a minimum the business will achieve an additional 5 days of productivity per employee per year, increasing their annual revenue by £1,437.

This increase in productivity is emphasised by the high availability the cloud offers, being 99.9% uptime. For example, if out of the 261 working days in the year ABC Ltd on average spent 1 day with their on-premise infrastructure down, they would lose £3,161 of revenue, a loss that would not occur with a Cloud based IT infrastructure.

So, overall the Cloud solution has come out on top for ABC Ltd, let’s take a look their ROI summary.



Over the 6 year period, moving to the Cloud would provide ABC Ltd with an incredible ROI of £62,595, but this is just one example. No matter what size of business, there are savings to be made.

Here, at Your IT Works, we understand that every business is different, and the Cloud may not be the right solution every time. This is why we have adopted a comprehensive TCO assessment and comparative tool that will provide you with a holistic view of the financial elements of both solutions.

Do you have an IT refresh on the cards?

Have you been considering Cloud Computing?

Do you need to reduce your IT spend but still need high availability, security and mobility?

Talk to us today to arrange your complimentary Cloud assessment. Your IT Works are your regional certified Cloud experts.

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