The Greek philosopher Heraclitus (c. 535 BCE—475 BCE) proclaimed, “There is nothing permanent except change.” Ironically, all these years later, Heraclitus’s sentiment remains true. Progress is frequent and continuous, especially in the realm of technology.
The advent of one technology leads to another, which sparks another breakthrough, and another. In only a matter of years, this domino effect can produce a world irrecognizable from years prior.
In this post, we will be particularly interested in the impact that cloud computing left on the modern data warehouse. We will explore the different options for data warehousing and how you can leverage this information to make the right decisions for your organization.
Understanding the Basics
What is a Data Warehouse?
A data warehouse is a centralized repository for storing, integrating, and analyzing data from multiple sources. A data warehouse acts as a single source of truth for an organization’s data, providing a unified view of its operations and enabling data-driven decision-making. A data warehouse enables advanced analytics, reporting, and business intelligence.
The data warehouse emerged as a means of resolving inefficiencies related to data management, data analysis, and an inability to access and analyze large volumes of data quickly.
Any business that deals with vast amounts of data across various sources can be subject to the aforementioned data-related issues. Implementing a data warehousing solution can drive real business outcomes, including:
Improved decision-making based on timely and accurate insights
Enhanced operational efficiency through streamlined data management
Improved understanding of customer behavior and market trends, leading to competitive advantage
What is On-Prem?
On-prem is a term used to describe the original data warehousing solution invented in the 1980s. As you may have surmised, on-prem stands for on-premises, meaning that data utilizing this storage solution lies within physical hardware and infrastructure and is owned and managed directly by the business.
What is The Cloud?
The Cloud represents an iteration beyond the on-prem data warehouse, where computing resources are delivered over the Internet and are managed by a third-party provider. Examples include: Amazon Web Services (AWS), Microsoft Azure, and Google Cloud Platform (GCP).
Key Factors to Consider When Choosing On-Prem or The Cloud
Factor | On-Prem | Cloud |
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Cost |
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Scalability |
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| Performance |
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| Security |
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| Maintenance |
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Cost
When deciding between hosting a data warehousing solution on-prem or in the cloud, the costs of data storage and processing are likely to be of utmost importance. Prior to making a decision, an organization must consider the Total Cost of Ownership (TCO) for each potential data warehousing solution.
With a traditional on-prem data warehouse, an organization will face more substantial Capital Expenditures (CapEx), or one-time costs, such as infrastructure setup, network configuration, and investments in servers and storage devices.
When investing in a cloud data warehouse, the Operational Expenditures (OpEx) will be larger. Cloud service subscriptions typically follow “pay-as-you-go” pricing models, where computing and storage costs are variable based on usage.
Scalability
Scalability refers to the ability to meet an organization’s computational needs as workload sizes vary. Historically, on-prem solutions suffer from a lack of scalability. With on-prem solutions, organizations must optimize for their largest workloads, often resulting in resource-over provisioning (and excess costs) for smaller, more frequent workloads. On-prem data warehouses typically struggle to scale up or down, requiring significant hardware upgrades to accommodate growth.
On the other hand, cloud data warehouses can scale seamlessly. In the cloud, businesses can easily increase or decrease their computing resources based on changing demand for data storage, processing power, and networking.
When using a Cloud Service Provider (CSP), organizations have the ability to scale both horizontally and vertically. Vertical scaling refers to the increase in capability of existing computational resources, including CPU, RAM, or storage capacity. Horizontal scaling increases the quantity of computational resources dedicated to a workload; the equivalent of adding more servers or clusters. Certain CSPs are even equipped to automatically scale compute resources, based on demand.
Performance
Before choosing a data warehousing solution, an organization must understand its latency and reliability requirements. Often, an organization will have established a Service Level Agreement (SLA), which defines the maximum delay the business can withstand between the time it requests information and the time it receives information.
On-prem data warehouses can provide lower latency solutions for critical applications that require high performance and low latency. Many companies may choose an on-prem data warehousing solution for quicker data processing to enable business decisions.
In the cloud, the physical distance between the data source and the cloud data warehouse region can impact latency. Data integrations and pipelines can also impact latency. Complex data transformations and ETL/ELT pipelines with significant data movement can see increases in latency.
Streamlining data ingestion and transformation pipelines can help decrease latency. Certain caching techniques, which store frequently accessed data locally, can improve data retrieval times. Further, choosing the right CSP subscription model can help an organization meet its SLAs and data availability requirements.
Security
For most organizations, security is a top priority when establishing a data architecture. Organizations want to ensure that their data is secure both at rest and in-transit. Different organizations will have different compliance and certification requirements, which may inform the decision to host data services on-prem or in the cloud.
As on-prem infrastructure is managed directly by the user, this data warehouse has been perceived to have greater control. Correspondingly, on-prem infrastructure requires additional management overhead to perform updates and patching across multiple systems. Additionally, on-prem data warehouses are vulnerable to bad actors obtaining access to their data centers.
A benefit of migrating to the cloud is the advanced security measures that CSPs provide. These advancements include encryption, access control, identity security, networking policies, backups, incident response plans, security audits, and compliance and regulation guarantees.
Maintenance
For on-prem solutions, the business owns the infrastructure maintenance, resulting in greater flexibility and an increased labor cost. With cloud solutions, all of the fully customizable characteristics of an on-prem data warehouse are provided as managed services. The chosen CSP orchestrates setup, updates, support, and even automation for the business.
Decision-Making Framework for On-Prem vs. The Cloud
Now that we are knowledgeable on some of the most important factors to consider when determining a data warehousing solution, it is time for us to make our decision. Which data warehousing solution is right for your organization?
Here are a few items to help you evaluate each data warehousing option and their implications for your business:
How variable are your workloads?
How available must your data be?
Do you have security and compliance requirements?
How large is your IT team?
Does your team have the experience to successfully manage IT infrastructure?
What is your budget for infrastructure, both now and in the future?
A Look into the Future
It is safe to say that, as time goes on, we will continue to witness an increasing number of organizations migrate their on-prem infrastructure to the cloud. In the late 20th century, when the on-prem data warehouse was an emerging technology, it was instrumental in separating analytical from transactional workloads and integrating data from across an organization to provide more insightful data results.
Today, the cloud has revolutionized the potential for data. Businesses are no longer required to make huge initial investments in on-prem solutions. CSPs assume much of the manual responsibilities once left to the businesses themselves, leaving more time for organizations to extract value from their data, rather than setting up and maintaining hardware. By taking advantage of the scalability and performance of cloud solutions, organizations are able to position themselves as industry leaders and maximize their ability to glean data-driven insights.
Conclusion
Change is inevitable, and technological advancements show no signs of slowing down. In order to stay at the forefront of your industry, it is crucial that your organization keeps up with the latest technology trends.
If your business needs help choosing a modern data warehouse or migrating a legacy data warehouse to the cloud, do not hesitate to reach out to your trusty advisors here at phData! In your journey to choose the right data warehousing solution, you might find our ultimate modern data stack migration guide helpful.
