Public-cloud providers now rent H100 and MI300 GPU nodes by the minute, while appliance vendors ship “datacenter-in-a-box” racks that can sit in an office closet. Each path offers clear advantages: clouds excel at bursty or exploratory work because you spin resources up and down on demand CloudZero, whereas on-premises clusters shine when jobs run 24 × 7 and data-gravity or compliance rules make egress costly ansys.com. The right answer almost always depends on workload profile, budget horizon, and governance requirements.
CapEx vs. OpEx
Up-Front Capital (CapEx)
| Item | Example Price (2025) | Notes |
|---|---|---|
| 8-GPU DGX H100 appliance | ≈ US $430 k supercluster.blog | Includes NVLink fabric & 10 kW power draw |
| 42 U rack build (4 × RTX 4090 nodes) | ≈ US $65 k | Mid-range option for SMEs |
A DGX paid for in cash sits on the balance sheet and depreciates over 3-5 years; any resale value is gravy. You also budget for maintenance contracts (≈ 10 %/yr) and spares stock
Operating Expense (OpEx)
| Cloud Instance | On-Demand Price | 24 × 7 Monthly Cost |
|---|---|---|
| Azure ND H100 v5-8 | ≈ US $100 h⁻¹ Microsoft Learn | ≈ US $72 000 |
| AWS H100 Capacity Block (8 × H100) | US $31.46 h⁻¹ reservation Amazon Web Services, Inc. | US $22 600 (48 h block) |
Because cloud is OpEx, it preserves cash but can dwarf hardware cost if utilisation stays high for months supercluster.blog. Reserved terms and spot pools lower rates yet still meter every second.
Energy & Facilities
U.S. commercial electricity averaged 19 ¢ kWh in May 2025 Energiedatenverwaltung. A DGX drawing 10 kW therefore adds ≈ US $1 370/mo before cooling overhead. Rising tariffs mean energy is the fastest-growing slice of on-prem TCO New York Post.
Performance Metrics
Compute Throughput
A recent cross-platform study scaled 256 GPUs across AWS, Azure, GCP and an InfiniBand Cray cluster; cloud sustained 90-95 % of on-prem FP32 throughput once placement groups and EFA/ND fabric were enabled arXiv. Another CFD benchmark found AWS C5n instances matched a Cray XC40 to 2 300 cores with only a 4 % cost premium when run spot-optimised SpringerLink.
Network Latency & Bandwidth
- On-Prem: HDR/NDR InfiniBand delivers ≤ 1 µs latency and up to 400 Gb s⁻¹ node-to-node SpringerLink.
- Cloud: AWS Elastic Fabric Adapter gives ≤ 6 µs one-way latency and 100 Gb s⁻¹, adequate for most MPI strong-scaling to 1 000 ranks arXiv.
For tightly coupled CFD or quantum-chemistry codes, those few microseconds matter; data-parallel deep learning tolerates the hit.
Storage I/O
Cloud HPC file systems (LustreFS on AWS, Azure LFS) now push 700 GB s⁻¹ aggregate arXiv, rivaling mid-range on-prem all-NVMe clusters. However, egress charges kick in once results leave the VPC, whereas on-premises parallel-file systems incur only power and support costs Red Oak Consulting.
Scalability & Flexibility
- Elasticity: Ansys Cloud Direct lets engineers burst to thousands of cores in minutes without queuing ansys.com. On-prem users must over-provision or wait for hardware refresh cycles.
- Hardware Choice: On-prem gives full BIOS/firmware control and early-access silicon, useful for tuning latency-critical codes SpringerLink. Cloud SKUs lag the bleeding edge by months but offer varied CPU/GPU mixes on the same API.
- Queue Time: Public-cloud capacity spikes during industry events can cause allocation failures; a dedicated cluster guarantees slots but risks idling when demand dips ansys.com.
Security & Compliance
Data Residency & Sovereignty
Healthcare and government workloads often require data to remain within a physical jurisdiction. AWS GovCloud and Azure Government carry FedRAMP High P-ATOs, satisfying U.S. public-sector rules Amazon Web Services, Inc.. EU customers lean on region-pinned buckets and Schrems II contractual addenda, but ultimate control is stronger when servers sit in-house censinet.com.
Network Isolation & Confidential Computing
Google’s Confidential VMs keep data encrypted in memory, preventing cloud-operator access WIRED. Comparable SGX/DAMD options exist on Azure and AWS Nitro Enclaves, albeit at a slight latency cost. On-prem clusters rely on physical segregation and air-gap policies.
Compliance Framework Alignment
- Cloud: Built-in ISO 27001, SOC 2, HIPAA, PCI toolchains shorten audits Amazon Web Services, Inc..
- On-Prem: You tailor controls but must own patching, logging, and penetration tests rescale.com.
Long-Term TCO
| Cost Category (3 yrs) | Cloud (24 × 7 H100 × 8) | On-Prem DGX H100 |
|---|---|---|
| Hardware / Rental | US $ 2.59 M (list) Amazon Web Services, Inc. | US $ 0.43 M supercluster.blog |
| Support Contracts | Included | US $ 0.13 M (maintenance 10 % per yr) ansys.com |
| Energy & Cooling | — | US $ 0.05 M @ 19 ¢ kWh Energiedatenverwaltung |
| Staffing | Minimal (DevOps/cloud ops) | + US $ 0.25 M (sysadmin FTE) rescale.com |
| Facility / Rack | — | US $ 0.03 M (space, HVAC) Red Oak Consulting |
| Three-Year TCO | ≈ US $ 2.59 M | ≈ US $ 0.89 M |
If utilisation drops below ~35 %, cloud’s pay-as-you-go offsets CapEx; above that, ownership wins within 18 months
Conclusion & Decision Matrix
| Criterion | Favour Cloud | Favour On-Prem |
|---|---|---|
| Workload Pattern | Bursty, unpredictable, seasonal | Steady 24 × 7, predictable |
| Scaling Need | > 1 000 nodes for days | < 500 nodes continuously |
| Compliance | FedRAMP/ISO tiers suffice | Data must never leave site |
| Budget Cycle | OpEx preferred | CapEx available |
| Performance Sensitivity | Latency-tolerant DL/AI | MPI CFD, sub-microsecond latency |
| Staffing | No HPC admins | In-house sysadmin team |
Rule of thumb:
If jobs run at > 60 % utilisation year-round, buy hardware; otherwise rent.
If regulatory fines for data escape exceed 10 % of TCO, keep workloads on-prem; else leverage cloud elasticity.
Need deeper modelling help? Contact Alpine Blockchain’s HPC advisory team for a bespoke cost-performance analysis.