I read a great article recently pinning cloud solutions versus on-premise to see what the experts anticipate will be the new widely adopted service model. As someone who comes from the on-premise security business, and being in the midst of figuring out the best way to transition traditional solutions to cloud delivered ones, this is a very important argument. After all, just about every organization has used the on-premise model for security, so why is cloud a better decision moving forward?

Look at how cloud is starting to trend from a cost and deliverables perspective. The key goals of CIOs is to reduce costly capital requirements, streamline their business processes and ofcourse, keep costs low. By lowering overall operations costs, organizations can reinvest in their business to drive more value for their customers (internal and external).

So if you are able to take advantage of economies of scale to meet these goals, obviously it makes sense. And moreso when you see the significant price reductions recently hitting the market. Amazon alone has dropped their price almost 20 times over the last 6 years, and Microsoft is following suit. Their model is smart: lower prices to get more customers, and use the economies of scale to keep lowering prices for everyone. It’s a win-win situation. They can offer lower costs to their customers, and use the ongoing income to invest in new features and services that the market is looking for.

IT departments can’t do this. So buying vast amounts of on-premise equipment is not going to keep driving operating costs down, they are going to essentially stay the same until the equipment is paid off. Unfortunately when this happens it is usually time for an upgrade. They are never going to get more customers, yet they are always going to spend money. They simply cannot compete with cloud.

But not all cloud providers are the same. Vendors who are determined to put on-premise gear or base their business off proprietary software are going to get demolished in the global cloud market. In order to succeed you need to make sure that not only are you one of the first wave of providers to offer services, but that you are able to scale enough to take advantage of low cost hardware and utility costs. Ideally, you also want to develop platforms that can be widely adopted that can attract enough customers to allow for further investments while lowering prices to customers over time. Some organizations are looking at open source as a way to deliver some of these services.

At the end of the day, it is anticipated that we will eventually see the demise of on-premise equipment and a movement to adopt full cloud-delivered solutions for security. Not only will it help organizations keep up with the constantly changing challenges of the security landscape without significant investments in IT resources and equipment, but will allow the overall market to dictate to the provider market what services are going to be the key differentiator between standard IT providers and full-service cloud providers.