Azure Total Cost of Ownership

Azure Total Cost of Ownership

Cloud Computing has a concept of Total Cost of Ownership, or TCO. When dealing with the total cost of ownership, you have to look at two new concepts. Those are Capex, which is capital expenditures, and Opex, which is operating expenditures. You’ll need to spend money one way or another to power the services and applications that run the business, but the goal of course is to have a high-performing and reliable system for the least amount of money needed. This is where the total cost of ownership comes into play.


Software License Fees Vs Subscription Fees

TCO capex vs opex

The diagram above uses the concepts of Icebergs to illustrate how money is spent when using On-Premise solutions vs Azure or Cloud Solutions. The parts of the icebergs that are above water are the obvious expense you have to incur. So if you are looking at just what is above the water, it looks like the costs for the business’s infrastructure are similar. With On-Premise, you have to consider Software License Fees. In the Azure Cloud, you will have to pay Subscription Fees and at first glance, it seems like there is not a lot of benefits. In fact, many decision-makers will look at this and decide that if the privately-owned dedicated infrastructure in their own private cloud costs the same as subscription fees in the cloud, then why bother?

Total Cost of Ownership

Enter Total Cost Of Ownership. Total Cost Of Ownership considers not just what is above the water in the Iceberg model, but what is also below the water. Often times with Icebergs, what is below the surface of the water can be much more massive than what is visible above the water. The same holds true Total Cost Of Ownership. If the business has an On-Premise solution then they have the added costs of Physical Security, Hardware, Information Technology workers, and Maintenance. These factors are always considered when looking at the Total Cost Of Ownership.

For the Opex-based cloud solution, there will still be Implementation, Configuration, and Training expenses, but no longer will the business need to worry about Physical Security, Hardware, Information Technology workers, and Maintenance.


Possible Cloud Savings

Once the Total Cost Of Ownership is taken into consideration, many businesses find that they can save a great deal of money. How much? Well, Physical Security, Hardware, Information Technology workers, and Maintenance costs a lot, and when those are removed from the equation a business may realize savings of between 50 to 75%. That is a tremendous savings and is a big reason why all of the Fortune 500 have adopted Cloud Bases solutions in one form or another.

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