On-Prem ETL vs. Cloud ETL. How Do the Costs Compare?
In the rush to achieve analytics nirvana, companies are increasingly turning to the cloud, chasing the dream of lower deployment costs, lesser maintenance, reduced staffing worries, and constant availability. So, should you simply follow suit and jump onto the bandwagon? A well thought out cloud strategy backed by a solid TCO exercise can indeed deliver on the promise of the cloud and provide tremendous benefits. Let’s dig a little deeper and carry out a comparison to understand if embracing the cloud for your ETL initiatives is worth it.
IDC categorizes BI costs into five key groups – initial deployment expenses, management expenses, software expenses, hardware expenses, and downtime. Traditional on-premises ETL vendors sell applications for an upfront fee which can be quite heavy on the corporate pocketbook. After purchasing the application, customers have to deal with buying hardware, installing the application, and integrating different components before employees can use it, a process that can very well take up 12 to 24 months. And then there are the terrifying upgrade cycles that require companies to shell out more money, cause disruptions to the business, and last for months.
With the cloud, customers hardly need anything more than a web browser. Cloud providers typically charge a monthly fee and take care of hardware, implementation, and integration. This kind of a subscription pricing model avoids huge upfront CAPEX, allowing companies to use their cash reserves for other crucial business needs. Any upgrades to the software take place seamlessly and are often scheduled over weekends or off-hours.
As per IDC, staffing costs for an on-premises BI or ETL project make up two-thirds of the total cost of ownership over three years. Here are some interesting facts on this subject from the Crimson Consulting Group and Aberdeen:
- 25 full-time employees (FTE) are needed to manage a single on-premises server
- A majority of BI/ETL implementations need between 45 and 140 person-days to go-live
These figures demonstrate the deeply manual nature of on-premises ETL tools that need a lot of people to support their operations, so much so that staffing costs often end up exceeding license costs.
In contrast, cloud-based ETL tools are fully-integrated and are designed to eliminate a big chunk of the staffing costs that are required during the initial implementation phase and significantly lower staffing costs for everyday handling of the tool. Also, cloud providers do not recover their hardware costs by charging higher software subscription fees. Their hardware is shared across several customers, which significantly reduces expenses. Moreover, with the cloud, customers sign an uptime SLA that guarantees a monthly uptime percentage, leading to a substantial reduction in downtime costs.
Once an on-premises ETL application goes live, scaling up is another challenge that can quickly become time and resource-intensive, as it normally involves buying and installing additional hardware. In comparison, scaling up or down in the cloud is a breeze. However, in the long term, if the amount of data processed becomes very large with a high transfer rate, an on-premises tool is likely to offer more cost savings and better speed.
Security is an aspect that technologists seem unable to agree on. While some believe that on-premises systems are better protected, others believe that the cloud can ensure peace of mind. The truth is that we all know of on-premises applications that have been compromised as well as major cloud applications that have been hacked. But it is worth considering that, for cloud providers, providing a high level of security is crucial. Their livelihood hinges on it.
Deciding whether you need to move your ETL functions to the cloud requires a lot of thought and due diligence. Carrying out a TCO analysis is essential before you arrive at a conclusion. A carefully crafted cloud strategy can result in enormous cost savings and operational efficiencies, making your move to the cloud well worth it.