Cloud vs On-Premises – what’s the ROI?

In the ever-evolving tech landscape of 2025, business leaders continue to grapple with a a pivotal decision: migrate to the cloud or re-invest into physical infrastructure on premises. The heart of this decision lies with ROI and security, can the investment into hosted services deliver value for money whilst keeping our data secure and compliant?

Artificial intelligence dominating the current tech narrative has only further accelerated the drive towards Cloud Computing with an insatiable demand for more for CPU/GPU powered services. The scalability argument for moving to the cloud remains undeniable – but how about from a cost and security perspective?

The Cost Conundrum: CapEx vs OpEx

A few years ago Adobe pioneered this shift to CAPEX through their Creative Cloud Subscription model, much of my time working in the channel was spent explaining how a benefit of the subscription was flexible billing models, software updates and predictive billing.
This is still true regarding running your infrastructure in the cloud, however this is understandably much more complex as there are a large number of moving parts included in your subscription, think: hardware, maintenance, electrical billing, CPU/GPU requirements, scalable/burstable compute, storage tiers, data egress costs, uptime SLAs, application dependencies etc. This needs to be compared with the costs of running things yourselves on premises, which comes with it’s own cost implications: hardware and licensing costs, datacentre cooling, maintenance contracts, staffing and building a base level of CPU that will suffice in all conditions.

It’s important to emphasise that simply choosing to move to the cloud without a thorough readiness assessment (taking into consideration short and long-term ROI objectives) and professional implementation following proper industry recognised adoption procedures, can lead to the opposite results of what was desired in the first place.

A strong FinOps practice can mitigate this issue. Managed Services Providers like Cybit offer post migration wrap around support and FinOps management services to ensure full cost transparency/ownership and actionable insights and recommendations to mitigate overspend and leverage artificial intelligence to keep your data secure, compliant and even to help make more incisive business decisions.

Cloud’s ROI Superpowers

The Cloud’s perceived ROI is often rightly justified by its feature to only pay for what you use – providing effortless scalability from global datacentres (likes of Amazon Web Services and Microsoft Azure), with the capability to scale back resources as demand dictates. Essentially, you’re renting the compute required, without having to make the huge investments to have anywhere near the same amount of compute resource at your fingertips.

In terms of licensing, you’re only paying for what you’re use, simply provision the server resource and the required licence (ie Windows) and the core count is automatically counted for you and the licence applied accordingly; no licence agreement lock in or worries around compliance.
Microsoft Azure leverages its global software business to incentivise users into Azure by providing extended security updates on legacy OS, or indeed bringing your own on premises licences (via licence mobility through software assurance – Azure Hybrid Use Benefit) into Azure negating the need to pay again via other cloud providers, this can make the move to the cloud substantially less expensive and allows you to “sweat” your existing licensing assets a little further.

The Cloud also offers a number of Platform as a Service (PaaS) offerings, such as SQL databases. You can spin up the databases directly within the cloud without needing to worry about hosting the VM infrastructure underneath, this can be much cheaper as you don’t need to run the databases in high availability (ie run each VM as an active/passive instance with premium storage) as the uptime SLAs are included in the cost.
From a security perspective, the likes of AWS and Azure have security and compliance tools built in – but these are run on a shared responsibility model. This means the providers secure the underlying infrastructure (e.g., datacentres and hardware), while customers are still responsible for securing their data, applications, identities, and configurations.

This year, 2025, both platforms have invested heavily in AI driven threat detection, encryption and compliance tools, however, security effectiveness largely depends on correct implementation, as misconfigurations cause over 75% of cloud security breaches. Outsourcing the migration and security to third party managed service providers like Cybit, can mitigate this risk at the beginning of the migration by implementing correct security policies and practice, and ongoing proactive security maintenance.

On-Prem’s Enduring Edge

Moving to the cloud isn’t always the right option. For regulated sectors like finance or healthcare, having full access and ownership of data with the underlying infrastructure ensures compliance (such as data sovereignty) without third-party audits. Latency sensitive applications often run better locally without networking bottlenecks, and some of the PaaS offerings I mentioned previously, aren’t necessarily compatible with serverless options without a potentially expensive application assessment. The ability to effectively tailor systems precisely to the requirement, can potentially increase operational efficiency.

Long-term, stable enterprises with consistent loads often see better ROI here. No recurring fees mean costs plateau after the initial hit, making it ideal for budget predictability. Hybrid approaches are gaining traction, blending on-prem control with cloud bursts for optimal TCO (total cost of ownership).

Hybrid Cloud approaches continue to gain traction, and a prevalence of new services like IOT and edge computing, allows/requires organisations to access data closer to the source, without sending data to a centralised cloud services provider. A combination of both, local instances/storage, with effective cloud storage tiering at the cooler end can optimise performance and improve business ROI. Finding the right balance through effective assessment services are critical to identify and design the infrastructure and policies to support.

Tools like AWS TCO calculators can model scenarios, revealing break-even points. In 2025, as AI and edge computing blur lines, hybrids emerge as the ROI sweet spot—leveraging cloud’s flexibility without ditching on-prem’s reliability.

Conclusion

ROI isn’t one-size-fits-all. Assess workload variability, growth forecasts, and compliance needs. Tools like AWS TCO (Total Cost of Ownership) calculators can help model scenarios, revealing break-even points. In 2025, as AI and edge computing blur lines, hybrids emerge for many organisations as the ROI sweet spot – leveraging cloud’s flexibility without ditching on-prem’s reliability.

Ultimately, cloud often leads for dynamic businesses chasing rapid ROI, while on-prem suits control-focused stalwarts. Predictably, there is no “one size fits all” solution, rather a full readiness assessment, using native tooling and factoring in Total Cost of Ownership is critical in managing ROI expectations and building out an effective implementation/migration strategy to ensure those targets are met.