This is part four of a four part series about Cloud Native vs Cloud Hosted.
In part one of this blog series, we looked at the basic differences between cloud native and cloud hosted models and in part two and part 3 we looked at the pros and cons of the two models as it relates to IT leaders and Operations leader respectively. This part will focus on the two models from the perspective of a Finance Leader.
As Finance Leaders, you are definitely looking at efficiencies and cost savings. However, as transformation leaders, you are always looking for the best long-term investments that yield long term, strategic results. While Capex to Opex argument still remains relevant for all cloud models, there are several other nuances that needs to be looked at for every model.
Here is my take on some of the financial levers as it relates to the two models.
- While every cloud option offers the benefits of not paying for what you don’t use, there are nuances to it. With hosted option, the hosting service provider still has to invest in hardware, software dedicated to the customer. You might end up paying for unused seats since it is more contract based and not necessarily a pay by drink model. Cloud native ensures you pay for the exact number of seats you use.
- Return on Investment (ROI) still remains a key financial measure. While there might be good ROI options from various cloud models, when it comes to very small seat deployments, it is typical for hosted model to hit an ROI floor. Because, there is still a dedicated investment in hardware, software and the benefits do not outweigh the costs. It is just that someone else gets to do what you have been doing in house.
- As a Finance leader, predictability is as important as returns. True linear monthly costs are assured in cloud native model compared to various non linear costs which are often hidden in a hosted model. It includes more set up cost than cloud native, additional cost in hardware every time you scale, upgrade costs for software and hardware and a huge integration cost coming from a complex, time consuming and expensive integrations which are eliminated in cloud native which comes with easy to use, open APIs.
- Resource-wise (compute, storage, memory), hosted software is usually more expensive to operate, compared to a cloud native model because it was not originally optimized for a cloud environment.