Your business’s IT procurement team has an important decision to make: Should they invest in a traditional, on-premise infrastructure, or go with a cloud-based solution?
Let’s discuss the operational differences, cost structures, and long-term growth potential of each option so you can choose the best IT setup for your business.
What is On-Premise vs. Cloud IT Procurement?
There are two general approaches for your IT procurement team to consider regarding business technology:
- On-Premise Servers: This involves buying (and maintaining) IT hardware and software for an organization’s physical location. While it enables direct control and customization, it’s typically more complex and expensive to set up and scale.
- Cloud Solutions: This route outsources IT demands to third-party providers. Businesses typically choose from three types of service models: Infrastructure as a Service (IaaS), Software as a Service (SaaS), and Platform as a Service (PaaS). Cloud options are often highly scalable and require fewer upfront costs to set up. But they can be less customizable and, if you don’t work with the right provider, less secure.
Some businesses select a hybrid option, maintaining some on-prem servers and cloud services to meet their needs.
The route your IT procurement team takes will depend on a myriad of factors, including supplier relationships, cost, compliance, security, customization, and more.
Who Needs an On-Premise IT Infrastructure?
If your IT procurement team is considering an on-premise solution, here are some factors to keep in mind.
Initial Costs and Capital Expenditure (CapEx)
An on-premise approach comes with large upfront costs because of the complexity of custom setups. These costs cover hardware such as servers, storage systems, network equipment, and different licenses to use the required software. All of these costs are considered capital expenditures (CapEx), which can become a burdensome financial investment for smaller companies and startups.
Maintenance and Upkeep
After the initial setup, on-premise IT requires ongoing maintenance and management. Upkeep includes:
- Necessary hardware upgrades, repairs, and replacements
- Payroll for IT team members
- Training and administrative costs
- Software updates and patch management as needed
- Appropriate power systems and backup generators
- Cooling systems for on-site data centers
Ongoing expenses can add up quickly, which is why it’s best for organizations with healthy IT budgets.
Control and Customization
If your business needs a high level of IT control and customization, on-premise is ideal. You’ll have authority over the hardware, software, configurations, and more, equipping your team to create solutions that address unique business needs. This level of control is especially useful for companies with complex IT or cybersecurity requirements.
Security and Compliance
Some industries have to abide by strict regulatory requirements, such as government and healthcare. In this case, on-premise solutions can be beneficial. It gives these organizations physical control over data storage and authorized access protocols. It also enhances the ability to implement custom security measures and monitor compliance across departments.
Who Needs Cloud-Based IT Procurement?
If an on-premise approach sounds a bit too complex for your organization, here’s what your IT procurement team should consider with cloud options.
Operational Expenditure (OpEx)
Cloud IT platforms often have a subscription model where IT costs are allocated to operational expenditure instead of capital expenditure. There are a few benefits to this approach, including:
- Predictable expenses (monthly or yearly)
- Affordable upfront costs
- Approachable solutions for small businesses
- Greater scalability based on usage
- Potential tax advantages of OpEx deductibles
Overall, cloud structures can enable more financial flexibility for businesses that need to closely manage cash flow.
Scalability and Flexibility
Most often, cloud solutions are highly scalable depending on the amount of usage. In other words, resources can be efficiently scaled up or down depending on your IT needs. Your team can test different features and services, choosing which ones to toggle on or off.
Additionally, businesses can often experiment with various providers until they find the one that works best—without worrying about the financial burden of upfront costs. With the global infrastructure of cloud providers, it’s also possible to expand as your organization sees fit. This level of flexibility helps you adapt to market changes and new opportunities.
Maintenance and Updates
There are fewer maintenance requirements with cloud systems because providers typically handle the update processes. With this task outsourced and made virtually automatic, you get
- Instant software updates
- Most recent data security patches
- Less demand for in-house IT staff
- Updates on new technologies
- Reliable services and systems
- Robust disaster recovery options
These simple maintenance features can free up your employees’ time and energy to focus on profitable tasks instead of IT management.
Security and Compliance
Perhaps the biggest point of doubt surrounding IT via cloud systems is the level of security and compliance. Organizations have concerns regarding:
- Data sovereignty
- Potential vulnerabilities of data in multi-tenant environments
- Compliance limitations for highly regulated industries
- Unclear security roles in shared responsibility models
That said, leading cloud providers often invest in strong security measures to satisfy their customers and prevent legal challenges. If you find the right cloud provider, the security could be stronger than a custom infrastructure you set up in-house.
How IT Procurement Can Conduct a Comparative Analysis
Because there are pros and cons to each type of IT approach, it’s helpful for your IT procurement team to conduct a thorough comparative analysis before making a decision.
Cost Comparison
Consider the immediate and long-term costs of each type of IT solution.
On-Premise:
- Higher upfront costs
- Ongoing IT staffing costs
- Maintenance costs
- Specialized service costs
Additionally, on-premise options are often expensive to switch out of if you ever need to change technologies or workflows.
Cloud Computing:
- Lower upfront costs
- Ongoing subscription costs
- Flexible scalability
- Data transfer fees
Depending on your provider, there may also be hidden costs to consider.
Performance and Reliability
On-premise options typically involve predictable performance that’s customizable for intense workloads. This can result in low latency, quality control, and large bandwidth.
Alternatively, cloud options generally come with availability and reliability because infrastructure is globally distributed. This can give you a larger reach, immediate updates, and fluid scalability.
Business Operations and Goals
Consider everyday operations and long-term goals.
Does your industry have stringent compliance measures that you must continually monitor and control? On-premise is the most secure IT option.
Do you need IT solutions that are affordable and scalable? Cloud is your best bet.
Do you run a large enterprise that needs both of these outcomes? A hybrid approach might be ideal, leveraging both on-premise and cloud setups.
When Your IT Procurement Team Should Take a Hybrid Approach
Combining on-premise with cloud-based IT can offer some businesses the best of both worlds. For example, if your organization manages complex workloads with sensitive data but also has a large staff with less demanding tasks, a hybrid solution can serve both operations.
Some companies also transition from one IT option to another over time. In this case, it’s helpful to have a hybrid system in place to ensure smooth data transfer and plenty of training time for employees.
Discover IT Procurement Strategies for Your Company
For your IT procurement team to choose the best solution, they need to conduct a careful evaluation of your organization. Consider the costs, business goals, performance capabilities, and level of scalability your company needs both now and in the future.
To help you through this important decision, Meridian offers comprehensive IT consulting. We help you find the perfect infrastructure, whether it be on-premise, cloud, or hybrid.
If your IT procurement team would like support in setting up your systems in a way that meets future business goals, discover the Managed IT Services at Meridian today.
