Date:
8 Jun 2023
Author:
PREO AG
On-Premise vs. Cloud
Identify risks early and reduce them effectively
On the way to the cloud, companies are offered various scenarios and solutions. Large cloud providers such as Microsoft, Google or Amazon have been investing enormous sums in the development and expansion of their cloud products for years and push them with high advertising budgets. The advantages of location-independent working with permanent access to server capacities and software applications are not only tempting, but also extremely effective and in some cases even indispensable for numerous work areas, production processes and workplace requirements.
However, these conditions are far from being met everywhere. Our experience shows that especially in large companies with a high proportion of stationary workplaces, for example in almost all sectors of public services such as health, energy supply, waste disposal or logistics, but also in private and public administrations, the disadvantages of cloud computing become clearly visible.
In this blog post, we use the example of vendor lock-in to show which risks should be considered at an early stage and why more and more IT managers prefer hybrid solutions with the integration of used software licences or even completely rely on on-premise operation again.
Disadvantages of cloud computing - risk factor vendor lock-in
In the case of a vendor lock-in, a company is so strongly dependent on the products or services of a provider that it is difficult to switch to a competitor, which is usually very time-consuming and costly. Vendor lock-in often leads to the companies concerned shying away from the effort and instead preferring to remain dependent and accept the associated disadvantages. The danger of vendor lock-in exists in a wide variety of economic sectors. According to the European Network and Information Security Agency (ENISA), vendor lock-in poses a significant risk to companies in the IT sector, especially in cloud computing, and cites the following reasons, among others:
Why vendor lock-in is particularly problematic in cloud computing
Limited portability
Vendor lock-in arises in the cloud platforms that have been developed, primarily due to the development of proprietary interfaces, file formats or application logics that tie a company's entire workload of data, applications and resources to the respective providers. If the company decides to switch to a competitor or to run individual services itself again, it can be difficult to overcome this dependency. Workload transfer, data migrations and the adaptation of interfaces and applications are very complex and tie up considerable time and human resources.
Scarcely calculable cost development
Which brings us directly to the cost risk. On the one hand, there is the contractual dependency, which can also include price increases without an early exit option, as is currently shown by the example of Microsoft. With large volume licences, a total cloud solution can quickly become a massive financial burden. On the other hand, the vendor lock-in usually ties up considerable internal resources in the event of an exit or change of provider. This includes not only the technical aspects of complex adaptations and data migrations, but also the effort for employee training, the adaptation of internal processes as well as possible temporary restrictions of availability to complete downtimes.
Less flexibility and innovation
The impairment of medium- and long-term innovative capacity and flexibility is another risk factor of vendor lock-in, as the company can hardly benefit from new technologies, services or pricing models from other providers. In the areas of IT services and software development, with its comparatively short and dynamic development cycles, an excessive dependency on vendors can also prevent the company from reacting as quickly as possible to changing market conditions or business developments.
Study confirms: Cloud solutions often less efficient than on-premise solutions
The Enterprise Strategy Group, commissioned by Dell Technologies, investigated the extent to which moving workloads to the public cloud is worthwhile for companies. The results of the study, published in February 2020, show that 54% of the more than 1,200 IT managers from Western Europe surveyed said that such solutions cost more than on-premise operation. 58% said that their public cloud solutions cost more than expected or calculated.
Reduce vendor lock-in risk and find alternatives to the total cloud
To minimise this risk, companies should consider the following points in particular when implementing their cloud strategy:
- Carefully evaluate different cloud providers and their products and services, including proprietary interfaces.
- Before signing a contract, clarify the legal framework conditions for an exit from the cloud or a change of provider, for example in case of price increases or limited availability.
- Ensure portability of workloads with data, applications and resources.
- Have an internal exit strategy to minimise internal restrictions or downtime in the event of an exit or change of provider.
- Examine the possibilities of a hybrid solution including used standard software as an efficient alternative to the total cloud. As a rule, there is a high savings potential of up to 70 percent in licence costs.
- Specifically analyse for which work areas cloud applications are not necessary and on-premise software also fulfils all requirements in the medium term.
PREO-Tipp
Our licensing experts will be happy to advise you personally on the various options for integrating used software licences into a hybrid landscape, the associated price advantages for your company and the integration into your existing IT infrastructure.
Reverse your strategy - instead of total cloud, go for cheap second-hand software
Swedex, the European market leader in the field of document presentation, also experienced that a total cloud solution can lead to a cost spiral that is difficult to calculate due to the risk of vendor lock-in. The consequence: the medium-sized company was no longer willing to accept the dependency and left the Microsoft cloud model after three years. Instead, the Essen-based company relied on used on-premises software from PREO and was thus able to save licence costs of around 100,000 euros in the following three years.
In this customer case, you can read why those responsible were not only convinced by the immense cost advantages when they left the cloud, but also by the PREO-approved and audit-proof licence transfer as well as the support with a fast, uncomplicated software installation.
Used software licences - PREO offers a large selection and expertise
We are one of the pioneers in the European trade with used software and regularly advise companies that shy away from the complete switch to the cloud or regret it after just a few years. Too much dependence on providers often plays a decisive role. Thus, more and more IT managers either rely on the advantages of a hybrid solution or decide completely in favour of an on-premise solution. The use of used software licences, especially for standard software from Microsoft such as MS Office or Windows, offers numerous advantages:
- high savings in running licence costs of up to 70 percent compared to the respective new version.
- Personal advice from PREO licence experts on all questions concerning licence transactions or the integration of used software in classic network structures or hybrid licence models.
- 100 percent legally compliant and audit-proof licence acquisition with maximum transparency in all process steps, including complete documentation in the PREO licence portal "Easy Compliance".
- Existing capacities for software licence management in large IT infrastructure projects with thousands of workstations and transnational locations.
- Detailed market knowledge and extensive experience through the audit-proof transfer of over one million used software licences.
- Numerous reference projects for well-known companies
