Total Cost of Ownership: Cloud vs. On-Premise Storage
Cloud storage offers a practical and cost-effective solution for certain use cases, especially when dealing with smaller data sets or lightweight, distributed applications. Its main appeal lies in convenience, scalability, and minimal upfront infrastructure requirements. In these cases, the overhead of deploying and managing dedicated servers often outweighs the cost of storing the data itself, making cloud a more economical choice. When data is distributed, cloud is often a no-brainer.
IT consultant Tom Lawrence of Lawrence Systems has seen this pattern repeatedly. “Startups often use cloud by necessity. VC-backed funding prioritizes growth over infrastructure investment, storage needs are unclear, and growth is chaotic,” he explains. In other words, cloud makes sense when you can’t predict how your workloads will scale. But Lawrence cautions that many companies never re-evaluate once they’ve grown: “Cloud becomes technical debt.”
Reconsidering Cloud for Large Capacity Workloads
As organizations scale, many discover that cloud storage, though operationally flexible, can become financially burdensome. Industry studies and customer experiences alike show that data-intensive workloads often cause cloud costs to consume a significant share of IT budgets. Performance is also limited by internet bandwidth, meaning that even if you can afford the capacity, your ability to access or move data is constrained by network speed.
Lawrence echoes this point: “Cloud makes sense when your product does not have a predictable use rate. But once your growth stabilizes, the economics change, and on-premise becomes much more attractive.”
That realization is driving many organizations back to on-premise infrastructure, where they can regain financial control, ensure predictable performance, and reduce long-term storage expenses. This begs the question: how do we really compare the total cost of ownership between the two choices?
Cloud vs. On-Prem: An Apples-to-Apples Comparison
On-premise storage can be deployed in many different ways. Some approaches are inexpensive but require significant labor, while others are easier to set up and manage, though they come with a higher upfront cost.
To make a fair comparison, and because one of cloud’s biggest advantages is high availability—we’ve chosen to compare it against a highly available storage cluster from 45Drives. For simplicity, we will examine the cost of storing 1 petabyte of data using this clustering solution versus the cloud. The comparison uses a fully integrated 45Drives solution that includes hardware, software, service, and warranty under a single purchase order, spanning five years.
Total Cost of Ownership: A Closer Look
When evaluating storage options, the total cost of ownership (TCO) is a critical factor. Both cloud and on-premise models come with different cost structures, each with unique advantages and trade-offs. At 45Drives, our approach to on-premise infrastructure integrates hardware, software, service, and warranty into a single, predictable package. This makes it possible to directly compare a fully integrated storage clustering solution against cloud services over a five-year period.
Cost Modeling: Cloud vs. 45Drives On-Premise Clustering Solution
Components Included:
· Cloud TCO: Base monthly storage costs, plus additional expenses such as access fees, data egress, and required infrastructure like gateways
· On–Premise TCO: One-time infrastructure purchase, deployment, and optional support
Hybrid Storage Models: The Best of Both Worlds?
While cloud and on-premise infrastructures each have their advantages, many organizations are adopting a hybrid model to strike the right balance between flexibility and control. Frequently accessed, performance-critical data can live on-premise, while older or less sensitive data can be offloaded to the cloud.
This approach also helps with risk mitigation. Keeping a portion of data in the cloud protects against catastrophic events such as fire, flood, or hardware failure at the primary location.
Lawrence supports this thinking: “Not every organization will opt fully for cloud or on-prem. In many cases, a thoughtful hybrid approach delivers the most value, keeping performance-critical workloads local while still leveraging the flexibility of cloud for backup or less sensitive data.”
Backblaze: An Alternative Worth Noting
For those seeking cloud flexibility without pricing surprises, Backblaze B2 offers a smart, budget-conscious alternative to legacy cloud providers. It keeps things simple with clear pricing and no hidden fees for downloading data or making API calls. That makes it a great fit for teams who like the flexibility of cloud but don’t want costs to spiral out of control.
Below is a cost comparison from Backblaze’s website showing the price of storing 1TB of data on Backblaze versus legacy cloud providers:
Below is a cost comparison from Backblaze’s website showing the price of storing 1TB of data on Backblaze versus legacy cloud providers:
The Analysis
Looking at the numbers, the monthly cost of storing 1PB with Microsoft Azure comes to $20,063.85. Over five years, that’s $1,203,893.40. This figure reflects only the base storage cost. It does not include retrieval, egress, or API fees — all of which are part of the true Cloud TCO and can add up quickly once data is accessed regularly.
Comparing that to 1PB on an on-premise clustering solution from 45Drives shows a clear difference. The upfront investment of about $395K covers hardware, software, deployment, and five years of support and warranty. Even when you factor in electricity and cooling, the total cost stays far below the estimated $1.2M you would spend in the cloud.
More importantly, the expenses are predictable. Once the system is in place, the costs do not creep higher every time you pull data or scale up usage. Over a five-year span, that stability is what drives real savings. Cloud may make sense when you are small or unpredictable, but at scale the on-premise model delivers the lower total cost of ownership and keeps spending under control.
Conclusion: Choosing the Right Path
Cloud storage is great for flexibility, rapid deployment, and unpredictable workloads. It’s an excellent fit for startups, distributed applications, and cold storage scenarios where convenience and scalability matter more than raw economics. But as workloads stabilize and data volumes grow, cloud costs can quickly dominate budgets, turning a convenience into long-term debt.
On-premise infrastructure, especially as larger data sets are required, when designed around high-performance clustered solutions like those from 45Drives, provides a predictable, fixed-cost alternative. Over a five-year horizon, the savings are dramatic. Organizations can achieve both performance and capacity at a fraction of the cost of cloud, with full ownership and control.
For many teams, the best answer may lie in a hybrid model, combining on-premise performance for critical or frequently accessed data with cloud convenience for backup, disaster recovery, and cold storage. The key is to evaluate costs and performance over time, rather than defaulting to cloud because it seems easier at the outset.
