Cloud computing has unequivocally changed the IT landscape. By consolidating the IT resources of multiple enterprises, Cloud providers have achieved incredible economies of scale. This has enabled them to offer secure, cost-effective, and scalable computing power and data storage to virtually every organization, from the enterprise to the mom & pop shop. For many organizations, however, there is a question of whether they should leverage the speed and accessibility of the Cloud or take advantage of the customization abilities of on-premises solutions.
When looked at from an accounting perspective, the decision of on-premises versus cloud becomes even more complicated. A cloud-based unified communications solution allows for an organization to count their related IT spend as an Operating Expense (OpEx), as opposed to a Capital Expense (CapEx) with an on-premises solution.
- Own physical assets
- Count asset depreciation against taxes
- Purchased networking infrastructure counts as an asset
- Customizable contracts and Service Level Agreements (SLAs)
- Allows for phased rollouts
- Greater customizability and control
- Greater implementation support from vendors
- More direct control
- Easier to satisfy data sovereignty requirements
- On-Premises solutions are frequently more customizable
- “Pay-as-you-go” pricing available
- No need to overprovision hardware for peak loads
- Reduced physical hardware requirements
- Reallocate employees to focus on other critical functions
- Can self-service through a web portal
- Rapidly scale up and down on demand to accommodate peak loads
- Easy to access, manage, and scale
- Continuous software and hardware patches and updates
- Instances and services can be set up in hours
- High Availability & Disaster Recovery included
One of the biggest selling points for moving to the Cloud is that organizations can swap CapEx for OpEx while reducing their Total Cost of Ownership, but what does that mean? And does the Cloud really save money?
CapEx vs OpEx
Put into layman’s terms, an OpEx is an expense incurred as a part of doing business, whereas a CapEx describes the use of cash to purchase an asset which has tangible value. Counting an IT spend as OpEx can allow an organization to reduce their tax liability by counting the expense against their taxable revenues. On the other hand, CapEx allows an organization to maintain the value of their assets by investing cash into physical assets. This has a variety of potential financial benefits for a company, including counting the year-over-year asset depreciation against their tax liability.
Total Cost of Ownership
While a preference for OpEx or CapEx will most likely be determined by an organization’s unique needs, it is important to keep in mind the Total Cost of Ownership (TCO) of an on-premises versus cloud unified communication solution.
The nature of the cloud allows for an organization to rapidly spin up new instances with the click of a button and scale up and down on demand while leveraging a “pay-as-you-go” payment structure. On the other hand, an on-premises environment could be slower to implement due to customization needs, and usually requires additional time and expense to scale. They also must be architected to cover peak loads to ensure proper function during peak loads. The rapid scalability of the cloud, little to no need for on-premises hardware & infrastructure, reduced need for support staff to maintain the cloud environment, and the economies of scale achieved by cloud providers generally results in a lower TCO for cloud-based solutions than an on-premises solution.
Both On-Premises and Cloud-based unified communications solutions can provide a given organization flexibility, depending on that organization’s business goals.
When it comes to on-premises communications solutions, flexibility primarily comes in the form of customizable and business specific request for proposals (RFPs), contracts, and Service Level Agreements (SLAs) between an organization and their service providers.
Unlike cloud services that can be somewhat rigid and lacking in customizable features, on-premises providers are usually accustomed to providing more hands-on support. This is because on-premises solutions are typically tailored to best serve an organization’s specific business needs. A trade-off for this hands-on support is that implementing an on-premises solution is often a more time-consuming process than a cloud-based solution, potentially requiring weeks to months to get fully up and running, depending on its size and scale.
Flexibility in the Cloud
While cloud-based communications solutions may lack some of the flexibility regarding customization, it’s gained in other ways. Flexibility in the cloud comes in the form of ease of use, scalability, and speed.
Unlike on-premises solutions, which can take weeks or even months to implement, many cloud-based solutions can be rapidly implemented in hours or days, instead of weeks or months. This enables virtually any organization to rapidly implement and scale out new solutions in days or even hours. It is worth keeping in mind, however, that each organization will need to assess whether these services will satisfy their unique business needs, especially with regards to data sovereignty. Depending on those needs, a custom on-premises solution may be a better fit.
Many IT departments have historically looked at traditional High Availability and Disaster Recovery (HA/DR) as a necessary evil. Due to the high cost of provisioning, implementing, and maintaining redundant infrastructure and hardware for “just in case” situations, organizations frequently neglect their HA/DR needs. Fortunately, due to the geographically dispersed nature of several of the largest public cloud providers, HA/DR is often baked into cloud platforms. Because of this, organizations frequently leverage a hybrid cloud in their HA/DR architecture as a means to make it more cost effective, scalable, and flexible. In fact, while HA/DR was historically reserved for an organization’s most critical workloads, the cost effective, scalable nature of the cloud has led to more and more organizations implementing highly available architectures across their entire IT environment.
One of the biggest advantages of the Cloud is its accessibility – any individual with computer access can go online and spin up a new cloud instance on any of the major cloud providers in minutes. This presents an appealing opportunity for new organizations as it is a much quicker and easier process relative to implementing an on-premises solution. For established organizations considering moving from on-premises to the Cloud, however, things are more complicated. Migrating to the Cloud is often a very involved and time-consuming process as it requires re-architecting your environment leveraging new and different technologies.
Another advantage of the cloud is access to updated software and regular hardware upgrades occurring at a much more frequent pace than on-premises. When an organization leverages a cloud service provider, they gain access to an organization which takes advantage of a continuous integration/continuous deployment (CI/CD) model to constantly deliver new features and hardware in their services. This helps to keep a given organization’s environment running smoothly without interruption.
Hybrid cloud environments, or an IT environment leveraging both on-premises and cloud solutions, are becomingly an increasingly popular way for organizations to capture the value propositions of both without going all in on one or the other. By leveraging a hybrid cloud deployment, organizations can maintain their customized unified communications solutions while taking advantage of complementary cloud services, including real time logging and monitoring, cost effective high availability/disaster recovery services, scalable on-demand compute and data storage resources (including backup storage), and the ability to easily extend your IT network to global scale.
Unified Communication Solutions for Any Environment
XMedius delivers a portfolio of voice & data communications solutions for every type of environment. Whether you run a purely on-premises environment, hybrid cloud, or are all-in on the cloud, your organization can take advantage of any, or all, XMedius solutions (note: XM Hospitality is currently only available on-premises). XMedius provides solutions for fax over IP, secure messaging, IVR, Unified Messaging, personal assistant, mobility functionality, outgoing notifications, and more. Our solutions are highly interoperable and can be integrated into virtually any existing IT environment to boost productivity while maintaining secure, compliant business practices.
For organizations considering an all-in move to the cloud, XM Connect, XMedius’s Unified Communications solution, can add additional value by helping provide for a smooth transition. The interoperable and feature-rich nature of XM Connect delivers a unified communication solution that feels virtually identical on-premises and the cloud, limiting the need to train employees on new systems.
Leverage a versatile, flexible unified communications solution and learn how you can bring your on-premises communications to the cloud. XMedius has experts ready to assist you.