With cost savings being a key driver for cloud adoption, many organizations choose the public cloud to achieve economies of scale. Although the public cloud sector continues to attract enterprise customers looking for a combination of price economy and cloud productivity, many customers also look to run several workloads privately within a private cloud. Contrary to popular belief that public cloud platforms are the most economical, recent research suggests that private cloud solutions can be more cost-effective than public cloud infrastructures.

Why Private Clouds are Becoming Popular Again:

The continuous need for speed and efficiency of operations is making cloud adoption a priority for many businesses today. Cloud services enable modern organizations to break the barriers of traditional business operations and drive innovation at a rapid pace and in affordable ways. According to a study, public cloud adoption increased to 92% and private cloud to 75% in 2018.

Private clouds work better for large enterprises, especially if they operate in regulated industries or have workloads with sensitive data. With private clouds, organizations have more control over their data and enjoy additional security, compliance, and delivery options. Also, with the generational shift in IT management processes and practices, private clouds enable the millennial generation to adopt simplified tools and intuitive graphical user interfaces.

Why Public Clouds Aren’t as Economical as they Seem:

Containing costs is one of the main reasons for public cloud adoption. Other reasons are the access to on-demand resources, quicker time to market, easier product development, and the ability to scale to meet varying needs. However, many organizations do not realize that public clouds are not always the bargain they expect and that they may not deliver the promised cost savings. Although public clouds help organizations grow revenue and increase productivity, with scale, the costs can mount rapidly, without the expected savings accruing to the business.

Also, in order to move workloads to the public cloud, organizations must consider the potentially high cost of re-architecting and re-coding applications. This is significant when compared to the relatively minor premium incurred in maintaining a private cloud. This certainly busts the myth that public clouds are always the cheapest option.

Making Private Clouds Economical:

Although the private cloud has often been touted as the right choice for organizations with mission-critical requirements at a premium price, this is not the full story. There are several ways in which private clouds are more economical than public clouds. 41% of organizations claim to be saving money using a private cloud instead of a public cloud – in addition to the perceived benefits of ownership, control, and security.

• For organizations that have the expertise to manage a large number of servers at a high level of utilization, private clouds can offer a total cost of ownership (TCO) advantage.
• Organizations that use capacity-planning and budget-management tools can achieve substantial economies of scale. Capacity-planning reduces costs by ensuring the hardware is being utilized with as little waste as possible. And budget-management enables consumption and expenditures to be tracked with the goal of reducing waste and optimizing spending.
• High levels of automation an also reduce manual tasks, allowing administrators to devote more time to other critical tasks. Organizations can increase labor efficiency by having access to qualified, experienced engineers. They can reduce operational burdens with the outsourcing and automation of day-to-day operations – high levels of automation drive down management costs significantly.
• Another key consideration is how organizations utilize cloud resources. Since TCO of a private cloud is directly proportional to its labor efficiency and utilization, for self-managed private clouds to be cheaper, utilization and labor efficiency must be relatively high. If the infrastructure is only used to about 50% of its capacity, the cloud administrator will need to manage a large portion of the infrastructure to achieve a TCO advantage.
• Lower costs can also be achieved by maximizing software license use. If licenses are based on CPUs, organizations can achieve improved license utilization by hosting a large number of virtual machines per CPU in a private cloud as compared to a public cloud where each virtual machine needs to be licensed separately at increased costs.

Choosing What Works Best:

In order to get the most out of their cloud investment, organizations must have a clear understanding of what works best in various cloud scenarios and what does not. They need to get past common myths and public hype around the “public vs. private cloud” debate. Enterprises looking to adopt the private clouds need to deploy it for large projects with high utilization and labor efficiency, using the right license model and the right combination of tools and partnerships to achieve economies of scale.

According to a study, even if the public cloud were to cost half as much as the private cloud, enterprises would migrate only 50% of workloads. This suggests that no matter how economical the public cloud may seem, organizations will still have other compelling reasons to use the private cloud. Organizations can also opt for a multi-cloud strategy to avoid vendor lock-in and leverage the best attributes of each platform. According to a report, 81% of enterprises today have a multi-cloud strategy. We have written previously about the multi-cloud and when it may be right for you. Go ahead, hop across there is that’s the next set of questions in your mind.