whitepaper POINTS TO INVESTING IN ON-PREMISE OR CLOUD
- The Ecommerce Ecosystem in Europe INTRODUCTION 1 INTRODUCTION Cloud-based services are becoming increasingly attractive for SMBs seeking to reduce costs and focus almost exclusively on the growth of their businesses. But while many organizations push toward an all cloud architecture, they may be neglecting opportunities to maximize their existing on-premise solutions. Advantages may be found in both solution types, from which the hybrid model emerges if properly implemented, companies may be able to enjoy the best of both worlds by selecting processes best suited to their business needs. Nonetheless, establishing the best course of action for any organization requires a discussion about the advantages and disadvantages of these solutions, analyzed and compared with appropriate business needs in mind. Consider the following commonly asked questions when considering a cloud solution and deliberating the best suited adoptions for your business. Following that, take advantage of a five-year cost and benefit comparison between real-market quotes for cloud and on-premise solutions, provided by cloud technology consultant and technology integrator OSF Global Services. With your wide range of choices comes the difficulty in distinguishing between the appropriate solutions and those where you may become bound with excess cost and functionality. Let this discussion spur the kind of inquiries for your providers that will leave you with an ideal solution, one that delivers on your clearly outlined business initiatives. Key questions 1 2 3 4 5 6 7 8 9 Which solution best fits my application? What technical expertise do I need? What are the different types of solutions? What are the best providers for me? What are the business benefits of the cloud? What are the technical benefits of the cloud? Does cloud offer more security? Which one is right for me: Public, Private or Hybrid? Where do I start?
KEY QUESTIONS - Which solution best fits my application? 2 Which solution best ts my application? Generally, there is no right or wrong answer to this question. When deciding whether or not to invest in a cloud-based business software application over an on-premise implementation, you need to consider all aspects of the hosting solution, and whether or not they are aligned with your business goals. CLOUD is a scenario in which the application provider manages the software, and the infrastructure is hosted and managed by a service provider. Sometimes the application provider and the service provider are the same firm. For instance Salesforce.com offers its CRM application that can run on the Salesforce.com cloud, dubbed Force.com. Or you can select a CRM application such as Sage and have a cloud service provider such as Amazon host and manage the infrastructure. If your organization's infrastructure is already IN PLACE, purchasing your own onpremise application and then running it and managing it yourself might be the right option for your business. One advantage is obvious: You have more control over every aspect of your solution from Service Level Agreements (SLAs) to dedicated system and security and regulatory compliance requirements. You also can be directly involved with any business critical integration decisions and processes. In addition, an on-premise solution carries less chance that data will be inaccessible due to outside connectivity issues with your service provider or compromised in any way due to factors outside your control. If your organization has SOME OR ALL INFRASTRUCTURE IN PLACE (even if this infrastructure is partially outdated), it is possible to keep parts of your solution onpremise and parts on cloud. A hybrid solution can bring you the best of both worlds and allow you to benefit further from your initial investment in hardware and/or software. Before you lock down your choice, you need to determine if you can achieve maximum business value from a cloud-based solution or if on-premise will better meet current and future business objectives. As you proceed, weigh the benefits of each, and ask yourself these key questions to help you define what your company really needs and expects from your solution. Let's Talk Cloud Always explain yourself. Depending on who you talk to, you may find each of them has a different understanding of what the cloud is, what it does, or even how it is defined. Avoid getting involved in a discussion about conflicting viewpoints about the cloud. Focus on what the cloud means for you and your business. Don't Oversimplify. Assuming one cloud can solve all of your complex issues is a mistake. Involve yourself in the details of your overarching solution. Stay in Business! Remember why you got involved with the cloud in the first place to make your business better. Don't lose sight of that once you've seen what the cloud has to offer.
KEY QUESTIONS - What technical expertise do I need? 3 What technical expertise do I need? If you choose an on-premise solution, you will need IT staff to manage your company database, maintain it, scale it (as your company grows), fix hardware and manage all other equipment issues. Your IT staff need to keep your software solutions updated, well configured and fine-tuned. Also, an on-premise solution needs to be secured, constantly monitored and any incident (even the false positive ones) needs to be detected, analyzed and mitigated. If this staff cannot be hired to perform on a regular basis, at the very least an external consultant is required to perform regular system assessments, maintenance and repairs. If you choose the cloud, you need to add a layer of knowledge of the cloud to your IT team. They will have the advantage of managing your entire environment on the internet called web-based control including all access methods, scheduling, existing integrations and more, with just a few clicks. It is important to prepare your IT staff for this change in roles. Do not assume that you will no longer need an internal IT department once your organization takes your infrastructure to the cloud. Instead, the IT staff's role will change from one of hands-on troubleshooting to one that is managerial. The IT manager now becomes a liaison to the cloud provider, monitoring its work and making sure the organization gets the best value for their investment. Additionally, the cloud is not without limitations: Network Connectivity If it is not fully reliable, the client will have problems accessing the cloud. Cloud Integration Integrating existing applications with those on the cloud can be a complex process without a knowledgeable solutions provider. Multi-Tenancy Services Certain features or the amount of data that users can store can become an issue. Make sure you are not walking into the cloud blindfolded. There are experts in the field of cloud integration and ongoing cloud services that can help you choose the right solution, maximize the efficacy of your assets and set you on the path to success.
KEY QUESTIONS - What are the different types of solutions? 4 What are the different types of solutions? On-premise solutions are typically very similar from vendor to vendor, and most often include server hardware, software, storage, data backups, and disaster recovery. Software is installed and operated on an in-house server, infrastructure and workstations. Customers must buy a licensed or purchased copy of software to run the solution. The three common types of clouds are Software-as-a-Service (SaaS), Platform-as-a-Service (PaaS) and Infrastructure-as-a-Service (IaaS). SaaS is simple it is software you have access to and may use without buying it yourself. Let's consider a simple case: as an alternative to buying Microsoft Word and installing it on your computer, you might use Word online from Office 365. This software is not directly installed on your computer, but is supported elsewhere and is accessed through a browser. In that case, you are using SaaS. The result is scalability and on-demand accessibility. As opposed to on-premise solutions, which are loaded onto individual computers or client devices, SaaS software resides in the data center of a third-party; while companies with onpremise solutions access applications in their own data center, SaaS users simply access them via the Internet. PaaS is often described as an evolved case of SaaS. PaaS involves a platform that is offered to you as an alternative to buying a platform to do the job yourself. Let's say you want to use a SQL database from Microsoft. You have two options: buy a machine and install a Microsoft SQL server and populate it, or utilize a PaaS with Microsoft SQL minimizing the initial investment and relieving you of costs associated with maintaining and upgrading your technology yourself. PaaS encompasses larger solutions that include more than a service, like ecommerce platforms Magento or Demandware. IaaS resembles a normal on-premise infrastructure that has been virtualized, allowing organizations to rent equipment - paying only for the capacity they use - that an offsite provider owns, manages and maintains themselves. These organizations needn't worry about hardware, storage, networking or other services because the third party provides the flexibility and scalability they need to meet the demands of their budget as well as their growth. Organizations' applications are supported by virtual machines accessible through a web browser and other specific remote access points. Those solutions offer the same amount of access as an on-premise virtualization solution, and you can control the virtual machines from the early boot stages. When an IT services provider like OSF Global Services develops a solution for a client, quite often the solution will involve a mix of these three methods. The client may use their database in SaaS or in PaaS because either of them will automatically offer redundancy, and duplication on multiple geographic regions at no additional expense. An optimal combination of the models involves enabling each to address their best-suited needs. For example, IaaS is wellsuited for infrastructural needs, Paas for development and test, and SaaS for hosting data in a public cloud instead of a costly on-premise solution.
KEY QUESTIONS - What are the best providers for me? 5 What are the best providers for me? There are a number of well-known on-premise solution providers such as Dell, EMC, HP, Cisco, Juniper, f5, NetApp, EMC, Citrix and VMware to name a few. As for cloud solution providers: AZURE Azure takes advantage of Microsoft's relationships with its customers, has a seamless extension of its existing operations, and, sometimes, offers double-digit discounts to long-term Enterprise Agreements. Any change to its SLAs are announced 90 days ahead of time. AMAZON The company not only has a massive public cloud, it makes it easy to scale those on-demand resources up a n d d o w n t h r o u g h a management dashboard or APIs. Amazon has rapid selfservice provisioning and integrates well with many third-party network vendors to provide direct links into the cloud. RACKSPACE Rackspace plans are often easier to understand than those of other providers. They offer free, infrastructure level support, 24/7 access to its cloud-support engineers and a s s i s t a n c e w i t h c o d i n g, launching cloud ser vers, security, and more. They offer highly competitive pricing and are known for their enthusiasm for customer support. Some more notable providers include Citrix, Oracle, IBM and even Google. Compliance Government organizations and companies affiliated with the government should be sure their cloud provider has the necessary compliance for their industry HIPAA, FedRAMP Eu Data Protection, PCI DSS for instance.
KEY QUESTIONS - What are the business benefits of the cloud? 5 What are the business bene ts of the cloud? Cloud has become so popular because of its many immediate business benefits, those that make it advantageous to on-premise solutions. Consider whether or not these overlap with your priorities moving forward. Minimal investment in infrastructure. On-premise systems require a great deal of space, private security, on-site operations staff and, most notably, good old-fashioned hardware servers, routers, power supplies, and myriad other essentials that keep purchases and maintenance a big part of your budget and workload. All of those expenses roll into each and every one of your project budgets. Cloud computing requires none of these things typically not even a startup cost. Scalable and flexible. Imagine you just invested in an on-premise infrastructure supporting an application whose popularity has skyrocketed. Too often that infrastructure will not scale to the needs of your growing popularity, turning your great success against you. Or, even worse you make a huge investment in your infrastructure, and your application fails. That's a lot of infrastructure, and a lot of your money, going to waste. Cloud provides your applications with just-in-time self-provisioning, so you don't have to worry about large upfront investments in order to support large-scale systems. This increases agility, lowers risk and lowers operational cost because you scale only as you grow and only pay for what you use no need to rush to buy more hardware, or anguish over your unutilized infrastructure. Utility pricing. Congruent with the scalability of the cloud is the flexibility of its pricing. As mentioned, you see immediate cost savings in paying only for what you use, freeing you from the burden of costly, unused infrastructure with the added benefit of a pricing structure that grows right alongside you and only then. Many organizations take an extra step and pass this flexible cost structure on to their customers. Reduced time to market. Cloud provides an elastic infrastructure, which can take a job that would process for 250 hours on an on-premise machine, and launch 250 instances, processing the same job in just one hour. Running jobs in parallel like this dramatically reduces time to market.
KEY QUESTIONS - What are the technical benefits of the cloud? 7 What are the technical bene ts of the cloud? Technical benefits may feed right into your business benefits, but take a look at these unique qualities of cloud infrastructure the gears that keep the big wheels of cloud efficiency turning, so to speak. Overload protection. Create a complete overflow-proof application by routing excess traffic to the cloud with effective load balancing and minimal steps. Automation. Automation refers to the process by which backups are automatic, and hence always made to be current providing ample protection against data loss, and optimizing power and computing resources. Automated cloud computing services can be securely provisioned with almost zero human interaction. More efficient development lifecycle. Unlike in an on-premise solution, development lifecycles in the cloud have extremely short release cycles, so that new features can be added on even a bi-weekly basis. Production systems may be easily cloned for use as development and test environments. Staging environments may be easily promoted to production. As-needed testing. Testing hardware is no longer a concern when you can automate testing at every stage of the development process. Spawn miniature, preconfigured test environments for each and every instance in which a test is needed. Disaster recovery and business continuity. When disaster strikes, do you want your DR systems to be in the line of fire, too? Cloud offers the advantage of geo-distribution, allowing you to replicate the DR environment in other locations, away from danger and with no loss to functionality.
KEY QUESTIONS - Does cloud offer more security? 8 Does cloud offer more security? Many businesses like to see their data in their office and prefer to do their own manual backups. But what about disaster recovery? Think about what would happen if there was a disaster at home? Would you be able to restore your data? The cloud makes this possible. As mentioned, when disaster strikes, you can simply download the latest copy of your data and be up and running in no time. If the business requires, it is possible to have redundant setups with small downtimes (meaning minutes, seconds or even no downtimes) when a disaster occurs or the production system is recovered. This allows 99.9x% SLAs with minimum investments (due to the fact that the DR environment doesn't need to be a one-to-one replica of the production environment until a problem occurs). Business leaders often see the cloud as being less secure than an on-premise solution. Existentially, valuable data that is not stored at home raises concerns about malicious parties out there getting ahold of those assets before the team at home can stop them. Security breaches in the public cloud are rare. However breaches involving on-premise data centers are not rare at all. In fact, according to the Cisco 2014 Security Report, Cisco security researchers found that malicious traffic was visible on 100 percent of the [in-house systems] sampled. Based on the activity they observed, Cisco researchers also determined that these networks likely had been penetrated for some time and that the core infiltration had not been detected. Most cloud providers invest heavily in security technology and personnel, quite simply because they have their clients to answer to. Failing to do so means going out of business. And for small- or medium-size businesses who cannot make large investments in security, cloud platforms quickly become the alternative with the greatest security offering among their limited choices. Even enterprises with developing security assets may benefit from the protection of the cloud. But as is often the case with the cloud, you cannot tackle a complex concern like security with one single solution. The security levels of cloud providers will vary, so have them demonstrate their capabilities and keep your on-premise capabilities under consideration.
KEY QUESTIONS - Which one is right for me: Public, Private or Hybrid? 9 Which one is right for me: Public, Private or Hybrid? Distinguishing between public, private or hybrid clouds, and selecting among the three with success, depends entirely on your business. Start with your business objectives, then consider the pros and cons of the three options to make a selection with which you can be confident moving forward. PUBLIC CLOUD A public cloud means your environment is running on an infrastructure that is shared with other customers in your region. Other clients that are in that data center c a n u s e p a r t s o f t h e infrastructure, like switches, disks and other networking tools even the processors or memory. This saves money thanks to scalability, flexible pricing and optimal utilization of resources. PRIVATE CLOUD A private cloud is internally hosted, as opposed to a public cloud, and is used by a single organization. Certain types of companies find this method advantageous for reasons such as data regulations and privacy. If a bank is required to store financial data internally, the private cloud would give them s o m e b e n e fi t s of c l o u d computing, such as on demand resource allocation. The private cloud offers greater reliability and control, but consolidated data means a single problem could affect the entirety of your protected assets. HYBRID CLOUD A hybrid cloud model is a cloud computing environment in w h i c h a n o r g a n i z a t i o n provides and manages some resources in-house and has others provided externally. For example, the hybrid cloud allows enterprises to benefit from the cloud's scalability and cost efficiency for some applications, and enjoy the s t o r a g e a n d s e c u r i t y advantages of an on-premise solution for others. Generally, this means more opportunities for a variety of operational efforts. ON-PREMISE TO CLOUD MIGRATION TOTAL COST / ONE TIME FEE $16,960 $3,200 $960 $12,800 Migration to Cloud Storage Migration Software Migration When migrating from on-premise to cloud, software migration represents the adjustments made to the application to adapt it to the cloud platform (changing configuration parameters and connection points, for example). In other words, servers are migrated from physical machines to virtual machines. In this case above, and from an operational point of view, the migration is handled by a System Administrator and a Senior Software Developer. Their work will be around 430 hours to migrate the existing solution (OS and software). This will be a onetime job, and so a one-time cost. In the migration process, the downtime is minimal for the storage component, this will be 0 to 5 minutes at most.
KEY QUESTIONS - Where do I start? 10 Where do I start? To get started, compare the key points of interest between providers based on your business interests, and select the one best suited to meet your goals. A cloud solution contract can differ from vendor to vendor, so make sure the details are in line with your business initiatives, and most notably the standards to which you would hold your own solution, or better. You will want to make sure you do not give your provider any rights to your data. Consider every scenario migration, termination or any emergency and investigate how your provider will engage in those situations. And as with any contract, take note of additional fees that may come into play should you require additional services or changes to your arrangement. Prior to migration, it is essential that you establish a fluid workflow between your technical and business teams, your in-house team and that of your provider in general. Have your team on stand-by to address any problems that may come up during the migration process, as your provider may not be obliged to respond to a crisis at this stage if it is not outlined in your contract. In order to begin your cloud migration, your desired application must be ready to be translated into the cloud. If it requires only small updates, it can be considered a physical-tovirtual process converters taking physical disks and configurations, and migrating them directly into the cloud. A better approach is to recreate the systems from scratch and install the application on cloud. This means starting with the install and rebuilding all of the systems that are involved in that application, to avoid wasting resources. This might be a good time to take on an experienced cloud services provider to help you with your transition. If you do your programming during low load times, the migration process adds minimal load and will not affect the performance of existing applications. This allows the possibility of as little as 5 to 10 minutes of downtime, perhaps even zero downtime.
FIVE-YEAR COMPARISON 11 FIVE-YEAR COMPARISON Here we provide a five-year comparison between the costs of launching and maintaining both an on-premise solution and a cloud solution. This study is specifically crafted for a web-based portal with a multi-tenant solution. The five-year breakdown is induced by hardware depreciation, both physical and moral, and the need for changes or improvement. We've used non high-end brand prices real-market quotes primarily based on SuperMicro for the on-premise solutions and a combined price from Azure, Amazon and Rackspace for the cloud. For the labor prices we used OSF Global Services' internal rates. All the prices are list prices, where on high volumes it is possible to obtain better prices. Five-year grand total costs: cloud vs. on-premise solutions Over a five-year period, the total costs of cloud and on-premise solutions vary greatly both due to the necessary components at the point of launch and the required costs of maintenance, all of which depend on contrasting essentials for each solution (e.g. hardware and software). In this example, the grand total includes the costs for all the components of each solution. For the cloud solution, this means the migration, HR, and virtual server costs. For on-premise, this means HR, hardware, and hardware updates costs. $411,020 CLOUD GRAND TOTAL for a hosted application $90,764 year 1 $77,004 $81,084 $81,084 $81,084 year 2 year 3 year 4 year 5 VS $1,071,200 ON-PREMISE GRAND TOTAL for a hosted application $238,373 $238,373 $240,707 $176,873 $176,873 year 1 year 2 year 3 year 4 year 5
FIVE-YEAR COMPARISON 12 Five-year Grand Total Cost Breakdown The differences for the annual costs between on-premise and cloud are visible in the graph below. $250,000 $238,373 $238,373 $240,707 $200,000 $176,873 $176,873 $150,000 $100,000 $90,764 $77,004 $81,084 $81,084 $81,084 $50,000 0 year 1 year 2 year 3 year 4 year 5 Grand Total includes the costs for all the components of each solution. Cloud Solution: Migration cost, HR, Virtual servers On-Premise: HR Cost, Hardware, Hardware Updates Five-year Comparison Summary ON-PREMISE CLOUD The project will cost more than $1,071,200 over a five-year period. The costs will be around $238,373 per year (the amortization of the services), and in the third year the cost will increase as a result of a necessary hardware upgrade, totaling $240,707. Starting with the fourth year, the costs will start to lower significantly, at $176,873 per year. The project will cost about $411,020 over a five-year period. The first year will be more expensive because it includes the migration of the application from On Premise to Cloud, totaling $90,764. The costs for the rest of the years will be about $81,084/year.
FIVE-YEAR COMPARISON 13 Our Ratings Based on our analyses, we typically recommend that our clients host their applications on the cloud. Our recommendation is based on the ratings in the table below. Cloud provider On-premise provider Migration cost N/A Platform scalability 5-year cost of project System performance Adapted to the needs Maintenance effort Labor cost High availablility Compliance levels Start-up project cost Overall configuration control Difficulty to terminate earlier Time delay to start a project CONCLUSION In choosing between cloud and on-premise, you have a clear set of characteristics, the advantages of which depend entirely on your business and infrastructure requirements. On-premise solutions are the oldest on the market. They offer a traditional approach, and in many cases also broad functionality. They require a large upfront investment and strong cash flow management for ongoing costs; such as data security, climate control, maintenance, insurance, upgrades and so forth. Cloud based solutions on the other hand provide a flexible and extremely accessible alternative where you can access real-time information where and when it suits you. Since they are based on a pay-as-you-go pricing model, you benefit from reduced upfront costs on hardware and software along with scalability that lets you adapt the solution as your business needs change. Another great advantage is that you can access real-time information from remote geographical locations. But the key advantage of cloud hosting is scalability, which makes it an attractive choice for a growing business.
The debate between traditional (on-premise) and cloud based solutions boils down to the specific details within each individual business. Keep in mind, you need to make the decision within the broader context of risk and reward. For instance, make sure you understand your business processes and cross-departmental workflow before deciding on any type of solution. Consider creating a business process diagram first to help you outline the ideal process map. Be sure to factor in both short-term and longer-term views. You should also make sure that your requirements will be met across a variety of criteria, including capabilities, cost, ease of integration, ongoing maintenance and, of course, the ability to empower users. Above all, deployment flexibility is essential in ensuring that your solution continues to meet your business objectives today and for the foreseeable future. To ensure you make the right choice for your unique business and IT requirements, start with the right questions. Consider SLAs, regulatory compliance, security, customization, cost and integration. With a clear understanding of how these factors impact cloud and on-premise applications, you will be well on your way to reaping maximum benefits from your chosen solution. Thank You for Reading! For more information on OSF Global Services digital commerce and optimization services, please check out our website: www.osf-commerce.com End-to-end ecommerce services, cutting edge solutions and best-practice methodologies to help you: Enable your Website Increase Conversion Rates Expand Globally