February 08, 2013, 1:40 PM — As more and more enterprises become comfortable with the concept of using the public cloud to replace portions of their on-premise infrastructures, I've seen growing surprise among IT organizations that the cloud does not necessarily save them any money. I'm not entirely sure what has given rise to the widely held impression that the cloud is always cheaper than on-premise infrastructure, but focusing solely on cost misses the point of what the public cloud is really good for.
The most obvious benefit of the public cloud is that it lets you access a very small slice of an enterprise-class infrastructure at prices that directly reflect the size of the slice. For small businesses that want a couple of servers or a small amount of storage for backup, the cloud can usually offer what you need much more cheaply than any similarly priced on-premise option, even over a long period of time.
The reason is those small workloads are not large enough to fully use the on-premise hardware and software that you would have purchased for internal deployment. If your needs grew to the point where you could fully use an enterprise-class backup, storage, and virtualization infrastructure, the apparent cost benefit of the cloud would melt away.