For most companies, maintaining a large IT presence implies large capital expenditures and a non-trivial amount of accounting and record-keeping to track depreciation, tax considerations, and so forth. When you purchase the hardware and the software, they become yours (in every sense of the word) and your long-term responsibility. The traditional model of enterprise computing is a capital-intensive function that requires expensive data centers (electricity, air conditioning, servers, networks, storage, etc.) and operations staff (hardware swaps, networks, backups, OS updates, upgrades, etc.) to keep it all running effectively. With an on-premises data center, you must plan and provision for maximum utilization, which is financially inefficient.
The appeal of cloud computing includes the ability of enterprises to pay for only what they use. If demand decreases and you no longer need the assigned capacity, you can turn off systems and you are no longer charged for those systems. Since the cloud is a subscription-based model, it is an “operating expense” model. Computing becomes a service for which businesses are billed a monthly charge that is metered by actual usage. The more (compute, network, and storage resources) that you use the more expensive your monthly bill. The less you use, the less you will be charged.
Another way to save money is cloud operations frees your enterprises of the costly tasks of system backups, routine network maintenance, software patches, etc. because you cloud provider can handle these tasks.
Most IT organizations find wide variations in system utilization. Some applications are seasonal and other applications run for a short period of time before being shut down. You might have other applications that are simply unpredictable and you can’t apply a cost saving model.
Building your server infrastructure in a cloud environment can save your business money and allow for greater innovations for less money.