The Future of On-premise Storage: Not So Hot

It wasn’t all that long ago when everyone stored their data on premises. Certainly, cloud storage has changed the landscape, but its adoption has not been as rapid or widespread as many predicted. Only about 20% of the world’s data is now stored in the cloud. So, what’s holding companies back? The answer is simple: until recently, there hasn’t been a real economic incentive to switch.

First-Generation Cloud Storage Offers Minimal Price Difference

Search for “total cost of ownership of on-premises storage” and you’ll get results that fall into a range between 2.5 and 3 cents per GB per month. Compare that with cloud storage solutions like Amazon S3, which comes in at 2.3 cents, and it’s really not a big difference in cost. In fact, when you factor in some of Amazon’s add-on pricing for egress, PUT, GET, LIST, and other operations, it could very well end up costing the same as on-premises storage. (Incidentally, Azure and Google Cloud are even more expensive!)

However, on-premises storage, with its associated hardware, software, and maintenance, has a limited shelf life and typically needs replacing every five years or so. This is when companies decide whether to write another big check to DellEMC, HP, NetApp, etc. or search for alternatives. Thanks to next-generation cloud storage solutions, such as Wasabi hot storage, there is now a compelling reason for migrating to the cloud.

A Closer Look at the Numbers

Here’s a quick chart comparing the costs of on-premises storage with cloud storage options from Amazon S3 (cloud storage 1.0) and Wasabi (cloud storage 2.0).

Cost Comparison for 1 PB of Storage

In this scenario, we’re using the NetApp AVA800-576TB-6TBX96-R6 as the on-premises storage server, which is comparable, if not lower priced, than similar offerings from DellEMC and HP. The NetApp server delivers 576 terabytes of storage at about $198K. That’s $344K per petabyte. Not a small capital investment, to be sure. When you move to the cloud, of course, you have no equipment costs. So, for the sake of comparison, let’s depreciate that capex over five years for a total of approximately $69K per year.

But we’re not done. You have to add the cost to run and maintain on-premises storage. You can conservatively estimate yearly maintenance costs at about 18% or $62K. Then there is all the other supporting gear like routers, switches, computers, racks, and cables—along with the power they consume. On average, physical storage comprises about 60% of the total cost of storage, so after you factor in data center costs and IT staffing the real cost of on-premises storage is about $270K per PB per year. That’s approximately 2.3 cents per GB per month—almost the same price as Amazon S3.

Wasabi is priced at 1/5th the cost of Amazon S3, so you get the same reliable, secure 1 PB of storage for just $49K. In other words, next-generation cloud storage from Wasabi costs roughly 8% less than the maintenance costs of our on-premises storage example alone. And that’s still only part of the story.

Greater Performance and Predictability with Cloud Storage 2.0

One of the arguments against migrating to cloud storage—the high cost of bandwidth—has collapsed along with its prices. Internet access is cheap these days like a commoditized utility should be. In the last year alone, we've seen our own costs for a 10 Gbps pipe go from $2400 to under $1500 per month.

Added to these costs are the egress charges levied by all the major cloud storage vendors. These fees make it difficult to budget for your total cost of storage each month, as it is nearly impossible to estimate how much stored data you will need to access. Amazon charges roughly 9 cents per GB for retrieving data from S3 over the Internet.

Wasabi has a problem with that model. We believe storage should be simple and predictable in price and performance, just like bandwidth, or any other utility. That’s why we offer metered egress of 4 cents per GB with no additional costs for uploading data (ingress) over the Internet. Customers can eliminate variable costs completely by opting for Wasabi Direct Connect, which provides high-speed connectivity to Wasabi with unlimited egress for one flat monthly rate. Customers can choose between 1 Gbps, 10 Gbps, or the industry’s first 100-Gbps connection to cloud storage.

At these network speeds, accessing data from the cloud can be just as fast, if not faster, than on-premises storage solutions. According to a recent Performance Benchmark Report, Wasabi hot storage can read data at nearly 5 Gbps, roughly 6X faster than Amazon S3—and more than a 5X speed improvement over a typical NetApp SATA storage appliance. Check out the findings and see for yourself.

Grow with Cloud Storage 2.0—Easily and Securely

A key benefit of embracing the cloud is the flexibility and elasticity of cloud storage. As your data storage needs increase, you can go from a few GBs to exabytes in a snap, without having to buy more equipment, hire more people, build more floor space, or use more electricity.

Finally, there’s one more important consideration for migrating to cloud storage: safety. Cloud storage providers like Amazon, Google, Microsoft, and Wasabi all offer 11 nines of durability. This level of durability is far higher than most on-premises storage. Plus, you get the benefit of geographical replication and tier-4 secure data centers.

When it comes to safety and elasticity, cloud wins over on-premises storage every time. With the rise of new Cloud Storage 2.0 technology, the cloud now beats on-prem solutions on cost and performance, too.

All of this adds up to big trouble for on-premises storage vendors. Which explains why many are retreating to super-high-performance niches where the cloud can’t compete. Meanwhile, investment in general purpose large-scale storage is stalled or shrinking. This trend will only accelerate as more buyers understand the difference between first-generation cloud and cloud storage 2.0

For more detail, I encourage you to read the white paper I wrote on Cloud Storage 2.0: The Birth of the Next Great Global Utility.