The Hidden Costs of Public Cloud for Canadian Businesses
Posted On September 25, 2025, by Megawire Marketing Team
In 2025, Canadian businesses are more digitally dependent than ever before. Financial institutions, manufacturers, contractors, and government agencies all rely on fast, secure, and resilient IT infrastructure to keep operations running. For years, the public cloud has been marketed as the ultimate answer: scalable, flexible, and cost-efficient.
But behind the promise of simplicity lies a growing challenge that many CFOs now know all too well—unpredictable public cloud costs.
Across Canada, executives are opening invoices that don’t align with their budgets. What was once pitched as a cost-saver is, for many mid-sized organizations, becoming a source of financial strain. The culprit? Hidden costs buried in the fine print: egress fees, storage charges, support premiums, and unpredictable scaling costs.
For CFOs tasked with ensuring financial sustainability and predictability, these surprises are more than frustrating—they can be disruptive.
The good news? There are cloud alternatives designed for Canadian businesses that want the benefits of cloud technology without the volatility. One such model is Hosted Ownership, a hybrid approach that combines the control of owning your IT infrastructure with the convenience and resilience of local data-centre hosting.
In this article, we’ll break down the true cost of the public cloud, why these costs are becoming increasingly problematic for Canadian businesses, and how Hosted Ownership offers a more predictable, secure, and financially sound solution.
The Allure of the Public Cloud
When hyperscale cloud providers first entered the Canadian market, they promised agility and cost savings. The pitch was simple:
- No upfront investment in servers or data centres
- Pay for what you use with on-demand scalability
- Automatic updates and patches handled by the provider
- Global infrastructure that grows with your business
For many companies, this seemed like the perfect alternative to the capital-heavy model of building and maintaining on-premises infrastructure. And in certain cases—such as startups, seasonal businesses, or companies with highly unpredictable workloads—it can be.
Source 1: “Cloud computing … reduce[s] upfront capital expenditures on physical infrastructure by shifting to an operational expenditure model, where costs scale with usage.”
Link: Wikipedia
But as more Canadian mid-sized businesses adopted public cloud, reality set in: the promise of lower IT expenses in Canada doesn’t always match the actual bills.
Source 2: According to Gartner and the 2024 Flexera State of the Cloud Report:
- 69 % of IT leaders reported budget overruns on cloud spending in 2023.
- Public cloud costs exceeded budgets by an average of 15 %.
- Cost savings remain a top initiative (60 %), but managing spend is the primary challenge.
Link: Wikipedia
The Hidden Costs Lurking in the Public Cloud
- Egress Fees (The Data Exit Tax)
One of the most surprising expenses for CFOs comes in the form of egress fees—charges applied when data leaves a public cloud environment.
- Uploading data to the cloud is typically free.
- Downloading or transferring that data elsewhere? That’s where the bill skyrockets.
For industries like financial services, manufacturing, and government, where large volumes of data need to move between systems, partners, and customers, these fees add up quickly. A company may budget for storage costs but overlook the cost of actually using that data.
- In practical terms, if a manufacturer moves large CAD files between its design team, suppliers, and clients—or if a financial institution is required to provide transaction data for regulatory audits—the egress costs can rival or exceed the cost of storing the data itself.Source 3: ThinkOn (Ontario-based cloud provider) highlights that hyperscale cloud providers charge significant egress fees—typically between 5–20 cents per GB, amounting to $2,000–$8,000 per month for 100 TB—fees that do not apply when using their local service with no egress charges.
Link: CIO Dive+2compugen.com+2Thinkon+2resources.compugen.com+2
Source 4: Data Center Dynamics outlines how egress fees—at roughly 7 cents per GB—can quickly escalate, turning data mobility into a budget driver and contributing heavily to vendor lock-in.
Link: Cast AI+3Data Center Dynamics+3blog.consoleconnect.com+3
- Unpredictable Scaling Costs
Public cloud is sold on the idea of “pay only for what you use.” While flexible, this model can wreak havoc on budgeting.
- A sudden spike in customer activity—such as a holiday sales rush for an e-commerce business or increased project activity for an industrial contractor—can trigger massive, unplanned increases in cloud expenses.
- Costs are often tied to processing power, memory, and bandwidth consumption, which scale automatically without real-time financial guardrails.
For CFOs, this means you might forecast a $10,000 monthly IT spend, only to receive a $25,000 invoice after an unexpected surge. While the scalability is powerful, the unpredictability is financially destabilizing.
Source 5: Cloud Capital (“The CFO’s Guide to Cloud Cost Forecasting”) focuses on the challenge of forecasting variable cloud spending due to fluctuating usage, pricing models, and workload patterns—highlighting how surges can derail budgets.
Link: Cast AI+10cloudcapital.co+10cloudcapital.co+10
Source 6: Cloud Capital (“Cloud Cost Volatility”) further emphasizes that auto-scaling, project demands, and storage usage often blindside finance teams. It recommends predictive analytics and real-time expense controls to counteract volatility.
Link: cloudcapital.co
Source 7: ThinkOn again mentions that typical hyperscale customers face 10–20% in unpredictable variable costs per month, underscoring how scaling models erode cost predictability.
Link: Thinkon+1
- Support & Management Premiums
Public cloud providers are built for scale, not personalization. Their business model depends on self-service platforms where customers manage most of the configuration and troubleshooting themselves.
- “Premium support” packages can cost tens of thousands of dollars annually, and even then, you may find yourself routed through call centres or delayed ticketing systems.
- When downtime or cybersecurity incidents occur, waiting in a queue for overseas support isn’t acceptable for mission-critical Canadian businesses in healthcare, finance, or manufacturing.
For CFOs, the issue is twofold: not only do premium support costs erode savings, but the lack of timely, personalized response can translate into lost productivity and real financial damage.
Context: SSC, tasked with consolidating and managing IT services across Canada’s federal agencies, has faced criticism for slow service delivery and disruptive outages.
Source 8: Former RCMP Commissioner Bob Paulson publicly criticized SSC for service interruptions, including failures in accessing key systems like CPIC (Canadian Police Information Centre) and BlackBerry messaging services
Link: Wikipedia.
Source 9: In August 2016, the Chief Statistician of Canada, Wayne Smith, resigned in protest over how SSC’s performance hindered Statistics Canada’s operations
Link: Wikipedia.
- Compliance & Data Sovereignty Risks
Canadian businesses, particularly in financial services, healthcare, and government, face strict regulations such as PIPEDA (Personal Information Protection and Electronic Documents Act) and PHIPA (Personal Health Information Act).
- Many public cloud providers host data outside of Canada or move it across borders for redundancy, creating compliance risks.
- Additional services to guarantee data residency, monitoring, and reporting often come with extra fees.
A single compliance breach can cost millions in penalties, not to mention the reputational damage. What looks like a small line item can quickly spiral into a major financial liability.
Source 10: ThinkOn (Ontario-based) provides a strong Canadian-focused solution: offering 100% Ontario-based data residency, transparent pricing (no hidden egress fees), and compliance support for public-sector, healthcare, and education—ideal for organizations bound by PIPEDA, PHIPA, and provincial privacy laws.
Link: resources.compugen.com+1
Source 11: Additionally, Pearl Organisation (Aug 2025) notes cloud cost challenges in Canada are often tied to data residency and compliance mandates, especially under PIPEDA and provincial regulations—where being unable to cross borders can limit cost-saving strategies.
Link: Pearl Organisation
- The Long-Term Cost of Vendor Lock-In
Once a company has invested in a public cloud environment, switching can be costly and disruptive.
- Data migration away from a hyperscale provider often triggers significant egress charges.
- Proprietary systems and integrations create vendor lock-in, limiting flexibility and negotiating power.
- As a result, companies may find themselves stuck in a cycle of rising costs with limited alternatives.
For CFOs, this lack of leverage is a financial risk. Predictable IT expenses matter just as much as performance and scalability, especially when budgets are set years in advance.
Source 12: TIG‑Canada (2018) explicitly discusses how egress fees contribute to cloud vendor lock-in—when migrating data out of hyperscale clouds, organizations face substantial costs, discouraging switching to hybrid or private setups.
Link: tig-canada.ca+2Cast AI+2
Source 13: Data Center Dynamics once more provides a concrete example: migrating a 32 TB drive at ~7 cents/GB could cost around $2,240—and scaling this across larger datasets sharply raises the barriers to vendor change.
Link: tig-canada.ca+4Data Center Dynamics+4Thinkon+4
Source 14: Cast.ai places data egress costs at ~6% of cloud storage costs on average, underscoring how such fees—and the inability to negotiate them—amplify vendor lock-in risks.
Link: tig-canada.ca+4Cast AI+4blog.consoleconnect.com+4
The Canadian Business Reality
While Silicon Valley often dominates the cloud conversation, Canadian businesses face unique challenges:
- Data residency: Clients in sectors like healthcare, legal, and finance require that sensitive data remain within Canadian borders.
- Regulatory compliance: Canada’s PIPEDA and provincial regulations like PHIPA add layers of complexity.
- Economic uncertainty: Mid-sized businesses in industries such as manufacturing and industrial contracting must carefully manage IT expenses to protect cash flow.
- Limited IT resources: Many organizations can’t justify large internal IT departments, making them reliant on external providers for support and infrastructure management.
These realities make the unpredictability of public cloud costs especially problematic in the Canadian context. A U.S.-based hyperscale model doesn’t always align with local business priorities like cost control, compliance, and accountability.
The Hosted Ownership Advantage
For CFOs seeking greater financial predictability, Hosted Ownership offers a compelling alternative. It’s not the public cloud. It’s not colocation. And it’s not traditional on-premise infrastructure.
Instead, it’s a hybrid IT model where:
- You own your servers, storage, and firewalls, ensuring long-term control and value.
- The infrastructure is housed in a local, professionally managed data centre run by your trusted Managed Service Provider (MSP).
- The MSP handles power, cooling, physical security, backups, and monitoring, while you retain full ownership and control of your systems.
This approach creates a balance between security, scalability, and cost predictability.
Key Benefits of Hosted Ownership
Security & Compliance You Can Trust
- Your data resides exclusively in Canada, protected by Canadian privacy laws.
- Facilities include redundant power, biometric access controls, and 24/7 monitoring.
- Compliance with PIPEDA, PHIPA, and industry-specific standards is built into the model.
Performance Where It Matters
- Dedicated infrastructure ensures no noisy neighbours or shared resource bottlenecks.
- Low-latency connections optimized for Canadian businesses and their clients.
- Custom configuration allows you to fine-tune systems for industry-specific applications (ERP, CAD, financial software, etc.).
High-Touch Local Support
- Direct access to local engineers who know your systems.
- No ticket tunnels or offshore call centres.
- Proactive monitoring prevents issues before they affect operations.
Predictable IT Expenses
- You invest in your own infrastructure—no surprise usage spikes.
- Hosting costs remain fixed and transparent, supporting budgeting and forecasting.
- Easy to scale by adding capacity in a controlled, cost-effective way.
Real-World Examples of Cloud Cost Challenges
- Financial Services: A mid-sized wealth management firm saw cloud costs triple during tax season as data retrieval spiked. Moving to a Hosted Ownership model gave them stable monthly IT expenses while ensuring all client records stayed compliant with Canadian privacy laws.
- Manufacturing: A growing manufacturer faced runaway costs when IoT devices across multiple plants started pushing terabytes of data into the cloud. Hosting their own servers in a local data centre allowed them to process and store data more cost-effectively while maintaining uptime for production lines.
- Industrial Contractors: A construction contractor running large-scale projects experienced unexpected fees when transferring project data between sites. By owning infrastructure hosted locally, they eliminated costly egress charges and gained better performance for real-time project collaboration.
- Government Agencies: A municipal department was challenged by federal requirements to keep citizen data in Canada. Migrating to Hosted Ownership ensured data sovereignty and compliance, while freeing internal staff from day-to-day server management.
Why CFOs Should Pay Attention
CFOs are under constant pressure to:
- Control IT expenses in Canada amidst economic uncertainty.
- Protect against financial risk from data breaches or compliance failures.
- Forecast IT budgets with accuracy to support long-term planning.
The public cloud often undermines these goals. A surprise bill for hundreds of thousands of dollars in egress charges can wipe out IT budgets and delay investment in growth initiatives. Meanwhile, regulatory non-compliance can result in fines and reputational damage that dwarf the cost of infrastructure.
Hosted Ownership provides a financial and strategic advantage by offering:
- Fixed, predictable monthly costs for hosting and support
- Reduced risk of data breaches through local, controlled environments
- Long-term ROI by owning your IT assets
- Trusted partnerships with local experts accountable to your business
A Smarter Path Forward
As digital demands grow, Canadian businesses need more than a one-size-fits-all cloud subscription. They need customized solutions that balance cost, security, and scalability. Hosted Ownership is proving to be that middle ground.
It’s a model designed for businesses that:
- Manage sensitive data and can’t afford compliance risks
- Require predictable IT expenses for financial stability
- Need high-performance infrastructure for mission-critical workloads
- Value long-term control and local accountability
At Megawire, we built our Canadian-hosted, fully owned private cloud infrastructure with these challenges in mind. We believe IT should be an asset, not a liability—and that every Canadian business deserves to own, host, and control its digital future.
Key Takeaways for CFOs
- Public cloud costs are unpredictable. Egress fees, scaling surges, and hidden support charges can quickly spiral beyond budget forecasts.
- Compliance matters. Canadian regulations like PIPEDA and PHIPA make data residency and security non-negotiable, yet many public clouds host data outside Canada.
- Vendor lock-in is expensive. Exiting a public cloud can incur massive data migration costs and limit financial flexibility.
- Hosted Ownership is a strategic alternative. It provides predictable IT expenses, local accountability, high-touch support, and full data sovereignty.
- Megawire delivers peace of mind. With over 25 years of experience, Canadian-owned data centres, and SOC 2 Type II compliance, Megawire ensures your IT investment supports—not surprises—your business.
Conclusion
The conversation around the cloud in Canada is shifting. For many mid-sized companies, especially in financial services, manufacturing, industrial contracting, and government, the public cloud’s hidden costs are eroding trust and straining budgets.
The alternative is not to retreat to costly, outdated on-premise infrastructure—but to consider a smarter model: Hosted Ownership. By owning your IT equipment while relying on a trusted Canadian Managed Service Partner like Megawire to host, secure, and manage it, you gain control, compliance, performance, and financial predictability.
For CFOs, that means fewer surprises, better ROI, and the confidence that your IT investment is truly working for your business—not against it.
References:
1. “How to Confront Canada’s Digital Dependence”
- Published: July 1, 2025
- Source: CIGI (Centre for International Governance Innovation)
- Why relevant: This essay highlights Canada’s digital reliance, noting that U.S. providers like Microsoft and Google dominate across the country—including in government and businesses. It underscores how severely “Canadian‑owned … stores … would grind swiftly to a halt if their office software were cut off,” demonstrating how dependent sectors are on digital services.
- Evidence:
“Microsoft and Google [have] a 93 percent market share in Canada.”
“US companies provide services for 60 percent of the cloud market in Canada, including for the Government of Canada…”
Link: Canadian Innovators+5CIGI+5Statistics Canada+5
- “How Canadian SMEs Are Powering the Economy Through Digital Transformation in 2025”
- Published: August 14, 2025
- Why relevant: Although post‑2025, it contains data about mid‑2025 digital trends, showing just how deeply digital tools (AI, CRM, e‑commerce, analytics) have become embedded in Canadian SMEs. It underscores that digital transformation is essential—not optional—for competitiveness. Many SMEs span industries like manufacturing, services, and contracting.
- Evidence:
“A remarkable 94 % of Canadian small businesses prioritize technology investment… 76 % plan to increase spending in the following year.”
“By mid‑2025, 91 % of Canadian SMEs have adopted generative AI tools…”
Link: CIGICanadianSME Magazine+1
- “Majority of Canadian Small and Medium-Sized Businesses Embrace AI”
- Published: June 25, 2025
- Source: Microsoft Canada News
- Why relevant: This report shows that digital adoption—and particularly AI tools—is now pervasive in Canadian businesses, especially in SMBs. This signals increased reliance on digital infrastructure for operations, productivity, and business strategy across sectors including finance, manufacturing, and services.
- Evidence:
“71 % [of SMBs] now using AI and/or generative AI (GenAI) in their operations.”
“Nearly 75 % … plan to increase AI investments, with 63 % prioritizing generative AI.”
Link: CanadianSME Magazine+1Source+2arXiv+2
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This blog is not meant to provide specific advice or opinions regarding the topic(s) discussed above. Should you have a question about your specific situation, please discuss it with your Megawire IT advisor.
Megawire is a full-service Managed IT services provider. We primarily service all of Ontario and the rest of Canada, the US, and Australia virtually. Our team provides IT infrastructure assessments, network security audits, cloud computing solutions, and IT support for businesses of all sizes and industries.
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