That is the verdict of analyst house IDC, which said research showed only provided short-term cost savings. Within three years of implementing software as a service, it said, large businesses regularly found the costs exceeded that of running their own on-premise systems.
"Cloud costs need to come down much further to be a realistic long term option," said Matthew McCormack, IDC analyst, at the company's recent Cloud Computing Summit in London. "It could be useful in the short term financially for companies with severe cost overruns."
"Your datacentre would have to be really poorly run for it to be more expensive than cloud in the long run," he added.
Businesses would be wise, he said, to look at their capital and operational costs over at least the last five years, to analyse their datacentre workload efficiency, and to take a long term view, before making any move to the cloud
But IDC also predicts that cloud service costs will eventually fall, as more competitors enter the fray, and as suppliers act to improve market-take up.
In one of the "biggest shifts in IT", McCormack said, specialist providers will emerge, including those offering high availability, high security, testing and development environments, and high performance computing.
Companies were worried about traditional technology concerns including , availability and bandwidth, he said, and were right to address encryption, acces control and usability.
But they also needed to be aware of the "real business issues" around cloud services before they moved away from on-premise in any area, McCormack said.
"You need to look at the vendor competition in that area of the market, checking that there's not one dominant supplier, so that you get the right price. Also you need to know what other useful products are out there to wrap around what you're doing," he said.
"And you've got to watch out that your cloud suppliers are using useful standards; you don't want to be locked in."