What Are Cloud Servers?
A cloud server is a centralized server resource hosted and served over a network (usually the Internet) and accessed by multiple users on an as-needed basis.
Cloud servers perform all the same functions as traditional on-premise servers, providing processing power, storage, networking, and the ability to run applications. They are typically managed by virtualization platforms, which enable multiple virtual servers to run on one physical machine in a cloud data center.
In this article we’ll compare the cost of cloud servers across the big three cloud providers, and help you understand which is cheaper – cloud servers or on-premises.
This is part of a series of articles about cloud cost management.
In this article:
- Cloud-Based Server Costs: Comparing the Big Three Cloud Providers
- Comparing On-Premises vs. Cloud Server Costs
Cloud-Based Server Costs: Comparing the Big Three Cloud Providers
Let’s get down to details and see how cloud servers are priced, when offered in an IaaS model, across the big three cloud providers: Amazon, Azure, and Google Cloud. A complete comparison across each of the hundreds of instance types is outside the scope of this article. Instead, we compare two groups of similar instances across the three providers, to give a taste of actual pricing differences.
Keep in mind that Amazon, Azure, and Google Cloud pricing is subject to change – for the latest pricing please see each provider’s official pricing page.
Which Instances are We Comparing?
To ensure a fair comparison, we selected instances with similar parameters across all providers:
- Instances running in the US East region
- Instances with the Linux operating system
- Instances with 4 vCPUs
On the memory side, we’ll compare two groups of instances:
- General purpose instances with 8 GB of RAM (except for Google Cloud which provides 16 GB even for this category)
- Compute optimized instances with 16 GB of RAM
Lastly, we’ll compare three pricing models:
- On-demand pricing
- Reserved instance with 1 year upfront payment
- Spot instance
Comparing General Purpose Instances
| Cloud provider | Instance type | On-Demand Price | Reserved Price (1 Year Upfront)* | Spot Price* |
| AWS | t4g.xlarge | $0.1344 | $0.079 (41%) | $0.0403 (30%) |
| Azure | B4ms | $0.166 | $0.0974 (41%) | $0.0638 (67%) |
| Google Cloud Platform | e2-standard-4 | $0.150924 | $0.0951 (63%) | $0.0453 (70%) |
* The percentage in brackets is the discount offered compared to the on-demand price.
Amazon is cheapest for on-demand instances, while Google Cloud consistently offers the biggest discounts for reserved and spot prices.
Google Cloud’s price is competitive when considering that its instance offers 16 GB of RAM, more than the comparable AWS and Azure instances.
Comparing Compute Optimized Instances
| Cloud provider | Instance type | On-Demand Price | Reserved Price (1 Year Upfront)* | Spot Price* |
| AWS | c6a.xlarge | $0.153 | $0.094 (38%) | $0.068 (44%) |
| Azure | F4s v2 | $0.1690 | $0.10 (41%) | $0.0259 (85%) |
| Google Cloud Platform | c2-standard-4 | $0.2351 | $0.1316 (63%) | $0.0540 (77%) |
* The percentage in brackets is the discount offered compared to the on-demand price.
Here too, Amazon provides the lowest price for on-demand instances. Google Cloud offers the most aggressive discount for reserved instances, while Azure offers the lowest price for spot instances.
Comparing On-Premises vs. Cloud Server Costs
On-premises infrastructure refers to hardware and software that is owned and operated by an organization and kept on the organization’s own premises. Cloud infrastructure refers to hardware and software that is owned and operated by a third-party provider and made available to users over the internet.
There are several factors to consider when comparing the costs of on-premises versus cloud infrastructure:
Upfront Costs
On-premises infrastructure typically requires a larger upfront investment, as you need to purchase and set up the hardware and software yourself. This includes the cost of purchasing servers, storage systems, and other hardware, as well as the cost of installing and configuring the necessary software. In contrast, cloud infrastructure is usually paid for on a pay-as-you-go basis, which can be more cost-effective for organizations that do not have a lot of upfront capital.
Maintenance and Support Costs
With on-premises infrastructure, you are responsible for maintaining and supporting the hardware and software yourself, which can be time-consuming and costly. This includes tasks such as patching and updating the software, repairing or replacing hardware that fails, and providing technical support to users. With cloud infrastructure, the provider typically handles maintenance and support, which can be more cost-effective.
Scalability
It can be expensive to scale up on-premises infrastructure, as you need to purchase and set up additional hardware and software as your needs grow. This can include the cost of purchasing new servers and storage systems, as well as the cost of installing and configuring the necessary software. In contrast, cloud infrastructure is generally more scalable, as you can easily increase or decrease your usage as needed, and you only pay for the resources you use.
Flexibility
With on-premises infrastructure, you are limited to the hardware and software that you have purchased and installed on your premises. If you need to add new capabilities or scale up your infrastructure, you may need to purchase additional hardware and software. In contrast, cloud infrastructure is generally more flexible, as you can easily access a wide range of resources and capabilities on demand.
The cost of on-premises versus cloud infrastructure will depend on your specific needs and requirements. It is important to carefully consider these factors and do a cost-benefit analysis to determine which option is best for your organization.
Related content: Read our guide to:
Cloud server costs
Cloud computing costs