On-Prem vs Cloud TCO Calculator

How it works

on-prem TCO = hardware + annual running cost × years · cloud TCO = monthly cost × 12 × years

On-premises spending is front-loaded: a large capital outlay for hardware, then a flatter annual cost for power, space and administration. Cloud spending is the mirror image — no upfront hardware, but a recurring bill that accumulates every month. Because of that shape, cloud often wins over a short horizon or for spiky, uncertain workloads, while owned hardware can pull ahead once it is fully utilised over several years. This simple model ignores the finer points — the time value of money, hardware refresh cycles, cloud discounts and the value of elasticity — so treat it as a first-pass comparison, not a budget.

Worked example

With $60,000 of hardware, $18,000/year to run it, and a $3,200/month cloud alternative over 3 years: on-prem = 60,000 + 18,000 × 3 = $114,000; cloud = 3,200 × 12 × 3 = $115,200. On-prem is cheaper by $1,200 — essentially a tie at this horizon.

Frequently asked questions