How to Calculate the Cost of Cloud Migration


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Tuesday, August 30, 2022

Before you embark on a cloud migration, make sure you're fully aware of the costs involved and prepared to cover them.

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How to Calculate the Cost of Cloud Migration
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Cloud migration is a major undertaking for your business - one that can transform how you operate and generate many benefits, but also create costs that you'll need to account for.

This is a big consideration for a huge number of organizations all over the world. Gartner research has shown that more than 70% of companies have now migrated some of their workloads to the public cloud, and this proportion is likely to increase in the future.

Gartner also highlighted the common financial risks associated with cloud migration. It's predicted that, by 2024, 60% of infrastructure and operations leaders will experience public cloud cost overruns.

To protect your business from similar issues, make sure you're prepared for the possible financial implications of cloud migration before starting the process.

Compare on-premises costs to the cloud

An important first step is to calculate the costs of your existing on-premises infrastructure and then assess how this compares to the cloud.

This isn't a straightforward comparison, owing to the fact that on-site and cloud computing have different cost models: Capex and Opex, respectively. Purchasing hardware is a significant upfront investment for your business (Capex), while licensing IaaS-based virtual resources and SaaS cloud services is an ongoing, regular expense (Opex).

You can compare the two options by taking the upfront cost of your on-premises IT assets and dividing them by the total amount of time you can realistically expect to use them.

Consider skills and staffing costs

Depending on the details of the migration and the approach you're taking, transferring data and applications to the cloud can be a complex process that demands specific skills and knowledge to get the best outcomes.

You'll need to give careful thought to the capabilities required to manage your cloud migration, and whether they can be accessed within your current workforce. If not, you'll have to account for the costs of acquiring these competencies, whether it's through permanent recruitment or temporary hiring.

The financial impact of this will depend on the availability of the skills you need and how many people are required. If you need to create an entire DevOps team to build your cloud infrastructure, for example, the costs are likely to be substantial.

Understand the costs of different cloud migration strategies

There are different ways to go about planning and executing a cloud migration . When you're evaluating the different options, one of the factors you'll need to take into account is cost, which can vary significantly depending on your approach.

The simplest - and most likely cheapest - method is rehosting, also known as 'lift and shift'. This is where you take the data and applications you're moving and transfer them to the cloud without changing them. While this strategy offers the least resistance, it also limits the range of cloud-specific capabilities you can take advantage of.

Refactoring, in contrast, involves re-engineering your resources from scratch to increase their compatibility with cloud hosting. This is a more complex and potentially costly form of cloud migration, but it can generate new benefits and efficiencies that make it worthwhile in the long run.

Research cloud provider costs

Moving from on-premises IT infrastructure to the cloud means you'll need to find a reliable cloud service supplier. The right partner will be able to help you leverage the many potential benefits of this change, from increased scalability and flexibility to improved operational resilience.

This comes at a cost, of course, so when you're evaluating different vendors, make sure you get all the information you need about their fees and what you'll get for your money. Most major providers - Amazon Web ServicesMicrosoft Azure and Google Cloud, for example - offer pricing calculators to help you get an idea of how much you'll pay for certain services.

It's important to bear in mind that cost isn't the only factor you'll want to consider when comparing cloud vendors. Other key areas to look into include:

  • Whether the platform and technologies available are compatible with your own
  • How they will provide ongoing support to ensure you gain consistent value from your cloud service
  • The vendor's data governance and security policies
  • Reliability and past performance indicators
  • Disaster recovery protocols

Ongoing transformation and indirect costs

The costs of a cloud migration aren't restricted to the immediate demands and practicalities of transferring your resources from on-site infrastructure to virtual hosting. There are many other financial commitments you might need to think about, such as delivering training to your teams and launching reskilling initiatives to ensure your company can operate efficiently in the cloud environment.

You should also be prepared for the possibility that this change will give rise to certain indirect costs for the business. Once key applications, data and workflows have been moved to the cloud, you could find that you're left with vacant data center capacity that is of little use but still costing you money.

During the early stages of strategizing your cloud migration, give yourself enough time to plan for scenarios like these and, if necessary, make budgetary provisions for them.

Further Reading 

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11/09/2022 Adam Jeffryes
It says that 70% of companies have now migrated some of their workload to the public cloud, but that percentage doesn't mean anything. 70% of how many companies? Which geographical locations? Which industries? When articles like this are written, it is important to clarify what the percentage is referring to.