There are many well known benefits of moving to the cloud - increased productivity, optimized performance, enhanced flexibility, and more. But to get a clear picture of the value that a cloud migration can provide, you should start in the pre-migration phase with a cost calculation.
To determine what it will cost to move to the cloud, as well as the potential savings it can yield, you first need to know what you’re currently paying for your on-premise IT infrastructure, as well as any other investments made in it. Then you’ll need to estimate the costs for a cloud environment.
The shift from a capital expenditure (CAPEX) to an operating expense (OPEX) model also comes into play. CAPEX is the standard model of traditional IT infrastructure procurement. OPEX is how cloud computing services are procured. Each has different implications regarding cost, control, and operational flexibility.
Your IT Infrastructure Costs
Calculate the direct and indirect costs for purchasing, operating, and maintaining the infrastructure included in your IT asset inventory. An IT infrastructure audit may be necessary if you don’t already have information on both direct and indirect infrastructure costs.
Direct costs include hardware such as servers and software such as operating systems. Indirect costs are the less obvious expenses such as lost productivity suffered during downtime.
Determine how much you are paying for or have invested in all physical servers, software licenses, maintenance contracts, warranties, supplies, spare parts, and other infrastructure. Work with your accounting, purchasing, and/or procurement departments to gather invoices, warranties, service contracts, and other documentation.
Note the details of your infrastructure, such as the number of servers you use, types of databases you use and storage capacity. Determine resource usage as well. This includes the network bandwidth, storage, and database capacity consumed by your servers and other assets and technologies. You’ll use this information when calculating your estimated cloud infrastructure costs.
Also make sure to include all facilities-related expenditures for housing, powering, maintaining, and protecting your IT infrastructure. These include real estate, utilities, and network connectivity.
Keep in mind your administrative and labor costs go beyond those associated with your IT staff. There could be labor and other expenses from Finance, Human Resources, Procurement, Training and Development, and other departments.
Most of your indirect costs will be related to downtime, such as productivity losses for employees and other users, customer dissatisfaction, non-compliance penalties, and damaged reputation. Among the ways to calculate these costs is to review log files to determine how often your servers go down and for how long. Then multiply that time by an average hourly rate. You’ll find many downtime calculators online that can help you calculate the various costs that can occur when your systems are down.
Your Cloud Infrastructure Costs
Determining exact cloud infrastructure costs can be difficult as you may not know exactly what you need. However, you can use information about your current on-premise infrastructure to estimate both the components of a cloud environment and the associated costs.
In certain situations, like lift and shift migrations, you can take the information about your on-premise infrastructure and resource usage and input it into one of the many cloud cost calculators available online. One to consider is Amazon Web Services’ (AWS) Total Cost of Ownership (TCO) Calculator. It enables you to compare the cost of using AWS to the cost for housing your applications in an on-premises or traditional hosting environment.
Simply input your configuration and storage footprint details. You’ll receive a summary report showing your three-year TCO by cost categories. You can also download a report with detailed cost breakdowns, methodology, assumptions, and more. This calculator, like others you may find online, is for approximation purposes only.
AWS also offers its Simple Monthly Calculator, which allows you to estimate your monthly AWS bill. The calculator requires you to input details about your potential cloud environment. If you don’t have all this information yet, just use any of the common customer samples provided.
CAPEX or OPEX?
Hard costs for IT infrastructure is one thing. How you pay for them is another. While it’s difficult to provide solid figures for the cost differences between CAPEX and OPEX, those differences should be considered when determining overall infrastructure costs.
With CAPEX procurement, you make a significant upfront investment to acquire, own, and maintain critical on-premise IT assets. As the exercise for calculating on-premise infrastructure costs shows, there are a variety of expenses associated with powering and maintaining the equipment as well. Another issue is the potential for overprovisioning. To cover the “unknown,” organizations may size and buy more equipment or other resources than needed.
Among the pluses is that if an IT asset’s useful life extends beyond a year, you can pay for it through depreciation. This allows for tax deductions as the purchase accumulates wear and tear. You also have full control of your resources without having to rely heavily on an outside provider.
However, once you’ve invested in infrastructure, you need to keep it for a certain period of time to get your money’s worth. If business needs change during that time or new technologies emerge that can’t be accommodated by your infrastructure, you either have to bite the bullet and purchase new equipment or make modifications to what you have – or miss out on opportunities.
Public cloud services, such as those provided by AWS, are delivered “as a service.” The cloud services provider owns the underlying infrastructure. You’re billed for using the resources on a pay-as-you-go or subscription basis, which means it’s treated as OPEX.
With AWS there’s no upfront investment, and costs can be more predictable. Cloud services are delivered on-demand and are scalable, so you can reduce the risk of over-provisioning. You also aren’t responsible for maintaining and repairing any equipment, which means you don’t have to devote resources to those functions or pay for service contracts. The cloud service provider is also responsible for uptime and making sure the SLAs are met.
More Cloud Migration Cost Considerations
There are other expenses involved in a cloud migration project. Among them: the costs for the actual migration process and for continued integration and app testing post-migration. You can learn more about them in a future blog.
There are also a number of ways to generate greater cost savings with a cloud migration, particularly if you’re moving to the AWS cloud. As an Amazon Web Services (AWS) Premier Consulting Partner, ClearScale has extensive knowledge of Amazon’s best-in-class services and the proven capability to migrate complex cloud architectures to the cloud. Our track record of success includes more than 400 infrastructure and application migrations for clients of all sizes across a wide array of industries. Read our cloud migration case studies for details.
Our experience also covers migrations from internal data centers as well as other cloud providers such as Rackspace, IBM Cloud (formerly SoftLayer), Google Cloud, and Microsoft Azure.
If you’re considering a cloud migration, let ClearScale’s solution architects help you ensure it’s a success – and generates the cost benefits you want as well.
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