Cloud Migration Costs
Cloud Migration Cost Analysis
Cloud migration is the process of moving applications and services from traditional infrastructure in a company’s private data centre to hosted solutions available on virtualized technology via the Internet, a solution known as the cloud.
While there are many benefits to cloud migration, understanding cloud migration costs are critical to building a business case for the migration and determining if it is the right move for the organization. Building a cloud migration cost analysis is a key planning activity.
Building a cloud migration cost estimate that can be compared to infrastructure improvements and current operational costs helps determine if the business case for moving to the cloud is a sound one. To build the cost analysis, a thorough understanding of operational costs is needed.
We will lay out the types of costs to include in a cloud migration cost estimate as well as provide a step-by-step plan to building a cloud migration cost analysis in this document.
Premigration Costs
A cost analysis should include all costs involved, from those that occur before migration starts, the actual cost of the migration itself, and the ongoing operational costs. Comparing the current operating costs against the post-cloud migration cost estimate demonstrates any cloud migration cost savings for the effort. The cost of moving applications to the cloud or cloud migration cost estimate indicates the investment the savings will need to cover to achieve ROI (return on investment).
Hardware
Servers, storage, network gear, hardware maintenance contracts, etc.
Software/Operating Systems
Operating system and software licensing, software support contracts, costs of staff to manage contracts and renewals.
Software/Operating Systems
Operating system and software licensing, software support contracts, costs of staff to manage contracts and renewals.
Networking
Telecom and network service costs (circuits), network staff, security operations, cost of staff to manage contracts and renews for circuits, security and vulnerability management costs (software and operations staff).
Operations & Maintenance
Data centre operations staff, cost of planned hardware replacement/upgrades, monitoring and incident management, capacity and performance management.
Data Centre
Real-estate costs, rack space and equipment, electricity, data centre facility management costs.
Migration Costs
The next set of costs to consider are those associated with preparing the future state cloud environment and performing the migration to the cloud itself that need to be included in the cloud migration cost estimate. These are considered the migration costs and may be broken down as follows:
Preparation
Once the cloud migration strategy is known for each application, the target platforms/infrastructure need to be configured, meaning cloud services will already be purchased and accruing before the value is provided.
Application Configuration
In addition to configuring the infrastructure, each application and interface needs to be configured and tested. This is essentially the refactoring or replatforming work to prepare the application to run in the new environment. This may drive additional temporary software costs as well as vendor services.
Temporary Network Capacity
To ensure data and applications can be moved rapidly enough, additional network circuits may be needed for the short term, with associated installation and carrying charges. Network gear may also need to be purchased or reconfigured.
Additional Staffing
In addition to hardware and licensing costs for the above areas, it may be necessary to secure temporary staff to help with the increased workload.
Post Migration Costs
The final part of the cost analysis to consider is the cost of ongoing operations for the entire infrastructure suite, both on and off-premises. In this way, the cost of cloud migration can be fully compared by knowing the original IT operating costs in full and knowing the future state IT operating costs in full, then evaluating the return on investment in the move (which is generally the migration cost bucket). These include:
SaaS Solutions’ Annual Costs
The annual contract cost for any commercial applications being purchased in a SaaS model
Cloud Provider’s Annual Contracts
Annual provider’s contracts for infrastructure and services being purchased from public cloud providers
Software / Application Licensing
Continuing software costs for both cloud and on-premises solutions
Staff Re-training for New Technology
Any training costs associated with staff skill development
Ongoing Staff Costs
Expected staff costs after the migration is complete, which may include some reductions in operational staff
Remaining Data Centre and General IT Operations Costs
Costs of operating applications that will remain on-premises after the migration is complete. These are still part of the ongoing costs and would include anything remaining from the categories detailed in pre-migration costs.
Cloud Migration Analysis – Step by Step Guide
Just as in planning for a cloud migration, assessing the cost of cloud migration has several progressive steps associated with it.
Step 1: Create a full inventory of all applications, the infrastructure on which they run, and all interfaces to other applications. This inventory should include as much discovery of hardware and dependency mapping as the organization can perform.
Step 2: Determine your cloud migration model for each application: which will be re-purchased from a SaaS provider and which ones will be re-platformed, re-factored, or re-hosted. Another aspect of the cloud migration estimate is identifying those services which will be retired as these will reduce both cloud migration costs and post-migration costs. These will have a considerable impact on the cloud migration estimate.
Laying out the costs will depend on the type of cloud solutions the organization is considering along with the vision and objectives of the migration to the cloud. There are three basic cloud models the organization might leverage, described below:
- SaaS: Re-purchasing commercial software from a Software as a Service provider generally shifts costs to a per-user license that includes hosting and operations of the software itself.
- Private Cloud: Re-platforming applications onto cloud/virtual infrastructure within the organization’s own data centre, placing all cost burden on the organization from operational staffing to infrastructure costs.
- Public Cloud: Re-hosting or Re-platforming applications into a cloud provider’s data centre and equipment, where the organization can pay for a predictable set of services and the provider bears the burden of cost management.
Step 3: Break down your cloud migration costs to the per-application/per user cost in each category. This will enable you to understand the cost of cloud migration for each application as well as the average cost of cloud migration across all applications. These breakdowns will assist in evaluating the best cloud migration strategy to use from a financial perspective.
If the organization cannot get this granular, the best cloud migration estimate that can be performed should be. For example, if a set of applications all sit on the same infrastructure or architecture, building a cloud migration cost estimate for those applications is still sufficient.
Step 4: Determine the final cloud migration strategy to be used for each application from the choices available, as this will drive the final migration costs. This is the choice to re-purchase, re-host, re-platform, re-factor, retire or retain that needs to be made for each application or group of applications. Once the final decision is made, the final cloud migration cost analysis can be determined.
Step 5: Determine the costs for moving each application to its final home. These should include the migration costs and post-migration costs for each.
Step 6: Build your cloud migration cost analysis, broken down for each application. This should include several different data points with cloud migration cost estimates, as demonstrated in the table below:
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Conclusion
Once the cloud migration costs are understood, an actual cost-benefit analysis can be performed. This enables the organization to determine the extent of its cloud migration plans. As with any large undertaking, there will be some areas where the costs seem reasonable given the criticality of the business service being moved and the revenue it produces, while others may seem cost-prohibitive. In this way, the cloud migration cost estimates can be used along with cloud migration planning to determine where to begin the process. In the context of cost, services that can be moved quickly, at low cost, and with high business benefits indicate a good place to start.
This is the benefit of a cost analysis: not only does it help in building a business case, but it also helps in cloud migration planning, enabling the organization to get the highest value possible out of its initial stages of cloud migration. It also helps determine the pace at which the organization wishes to proceed. One benefit to a multi-year approach is using savings to fund the next year’s migrations, at least in part.
Regardless of the scale of your migration, CG Technologies is happy to help you with your cloud migration cost analysis by providing you with estimates for your post-migration costs, templates for building your cloud migration cost estimate, and our expertise in this critical area.