Key takeaways on cost of moving to the cloud

• Estimating migration costs involves accounting for cloud provider fees, preparation expenses, manpower, and infrastructure. Post-migration, organisations can expect reduced costs due to the elimination of previous data center expenses.
• Evaluate which data and applications are suitable for migration. Not all assets need to be moved; a thorough assessment ensures that only necessary components are migrated, optimising both performance and cost-efficiency.
• There are four primary cost areas in cloud migration: infrastructure setup, data transfer, application refactoring, and post-migration expenses. Each component plays a significant role in the overall financial planning of the migration process.

What are cloud migration costs?

What should you take into consideration in order to prepare a realistic cloud migration cost estimate?

First and foremost, you need to assess what can be moved to the cloud and what cannot (because it’s either impossible or unprofitable). A very common mistake is assuming that the digital transformation requires every single file to be migrated to the cloud, otherwise you’re not being innovative enough. Well, that’s not the point.

A wisely completed migration means that you’ve moved only as much as is needed for your technical and business processes to run as smoothly, flexibly and efficiently as possible.

A thorough cloud readiness assessment and detailed profit-and-loss projections are key to smart optimisation.

Plus, you should define the best time to begin migrating your data and determine if you’ll need any help from an external IT partner or if you can do it all using just your in-house resources.

Once you have finished this part, you can create a calculation sheet including all of the other, smaller costs that are strongly associated with your migration.

What factors influence cost of cloud migration?

Cloud migration costs are influenced by several key factors that organisations must consider to ensure a cost-effective transition:

• Cloud provider
  The cost of the cloud provider is quite easy to estimate, based on the chosen pricing model and the amount of space and service usage. The difficulty lies in selecting the right provider. Bet on the expertise of a cloud expert for a smooth migration.
• Data volume and transfer
  The amount of data to be migrated influences costs related to data transfer, storage, and potential downtime. Large data volumes can lead to increased expenses and longer migration timelines
• Scale of Migration
  The size and complexity of the migration project significantly impact costs. Larger businesses with extensive on-premises infrastructure and numerous applications typically face higher migration expenses than smaller businesses with simpler setups.
• Transfer preparation
  You will definitely need to plan out the entire process and spend some time creating a proper strategy. And you may also end up having to rewrite your app or rework a service! This generates costs and has to be taken into account.
• Manpower and infrastructure
  You may want to consider hiring a cloud architect or additional CloudOps & DevOps (one or a few, depending on the complexity of the project), so that they can design and then create adequate infrastructure for your migration.
• Compliance and Security Requirements
  Ensuring data security and compliance with industry regulations during migration can add to costs, especially if additional tools or processes are needed to meet these standards.

This all sounds like a lot, but remember that once you’ve successfully migrated your data, you won’t need your previous data centre any more, so your total costs will drop down.

Plus, there are a few highly recommended tips and tricks that you can implement in order to make the most of your cloud solution and keep costs within a designated budget.

Listen to my conversation with Adam Grabek, as we explain how companies often lose money in the cloud due to inefficient management practices:

How can we calculate cloud migration costs?

Calculating cloud migration costs involves a comprehensive assessment of various factors to ensure a smooth and cost-effective transition.

Begin by thoroughly evaluating your existing IT infrastructure to understand current expenses. This includes hardware, software, maintenance, and operational costs. Establishing this baseline is crucial for comparing against potential cloud expenditures.

Determine which applications, data, and services will be migrated. Assess the complexity and interdependencies of these components, as more intricate systems may require additional resources and time, impacting overall costs.

Select a cloud migration strategy – such as rehosting (lift-and-shift), replatforming, or refactoring – based on your business needs. Each approach has distinct cost implications; for instance, refactoring often involves higher upfront costs due to necessary modifications but can lead to greater long-term savings:

• Cloud migration: strategy, planning and process
• What to consider when choosing a Cloud Provider for your business?
• Deployment models and considerations of cloud migration

Calculate the volume of data to be moved and understand the associated transfer costs, which can vary among cloud providers. Large data migrations might incur significant fees, so it’s essential to factor these into your budget

Consider ongoing expenses such as cloud service subscriptions, maintenance, monitoring, and potential training for staff to manage the new environment effectively. These operational costs are integral to the total cost of ownership in the cloud.

Leverage cloud cost calculators offered by major cloud providers to project expenses based on your specific requirements. For example, Google Cloud’s Migration Center provides tools to estimate expenses tailored to your migration needs.

Compile all identified costs into a comprehensive budget. This should encompass pre-migration planning, the migration process itself, and post-migration operations. Regularly review and adjust this budget as necessary to accommodate any changes during the migration journey.

What are the common challenges in estimating cloud migration costs?

Estimating cloud migration costs presents several challenges that organisations must navigate to ensure a successful and cost-effective transition:

1. Complex pricing models: cloud service providers offer intricate pricing structures with multiple dimensions across various services, making accurate cost projections difficult. Understanding these models is crucial to avoid unexpected expenses.
2. Hidden expenses: beyond obvious costs like infrastructure setup and data transfer, organisations often overlook expenses such as application refactoring, compliance assessments, and potential downtime during migration.
3. Application compatibility issues: legacy applications may not seamlessly integrate with cloud environments, necessitating modifications or complete rewrites. Estimating the time and resources required for these adjustments is challenging but critical for cost planning.
4. Downtime and operational disruptions: the migration process can lead to operational downtime, impacting business continuity. Quantifying the financial implications of such disruptions is vital for a comprehensive cost estimate.
5. Resource management: over-provisioning or under-utilising cloud resources can lead to unnecessary expenses. Effectively right-sizing resources requires continuous monitoring and adjustment, adding complexity to cost estimation.
6. Vendor lock-in concerns: dependence on a single cloud provider can limit flexibility and lead to higher costs over time. Evaluating the long-term financial impact of potential vendor lock-in is crucial during the estimation process.

Learn more about cloud computing:

• Public Cloud vs Private Cloud vs Hybrid Cloud: what are the differences?
• Cloud Adoption Strategy: plan, key factors and development
• Cloud cost optimisation: how to reduce your cloud expenses and maximise ROI?

How can we control cloud migration expenses?

You can actually save money on data centres that are located in the cloud:

• Get yourself a good subscription plan
  For example, you can choose to work with an IT partner who is part of the Cloud Solution Provider Program (CSP). They’ll be able to offer you a cost-effective and flexible solution – designed just for you.
• Try Reserved Instances (RI)
  By committing to a specific level of computing capacity usage over a certain period of time, you will receive a discount on your bill. For instance, you can save up to 72% with Amazon EC2 RI – compared to their On-Demand pricing.
• Cooperate with a bigger partner
  For instance, working with AWS or Azure provides you with a lot of additional benefits, such as continual support during and after the transfer, as well as discounts for licences and services.
• Bet on automation and auto-scaling
  Trying to configure, deploy and scale everything manually is a simple recipe for making many mistakes along the way and also for wasting your precious time. Automation will accelerate your processes and lead to better performance and availability.
• Take advantage of continuous monitoring
  Keep an eye on how much you spend, track unexpected spikes and cost anomalies, so that you can react before they escalate and maintain control over the situation.
• Find unused resources
  …and get rid of them immediately, so they won’t generate pointless costs. It’s easy to forget to turn off some temporary servers or remove storage that’s no longer needed. You could also consider creating a work schedule to help reduce costs while those resources are not in use.
• Correct inefficient code and optimise services
  This will help you limit your network traffic and increase your performance, which will be reflected directly in cost reduction.

What are post-migration costs to consider?

After migrating to the cloud, organisations encounter several ongoing costs that are crucial for maintaining and optimising their cloud environment. These post-migration expenses include:

• Infrastructure cost and software expenses – companies must account for regular payments for cloud infrastructure services and software licenses. These recurring costs are essential for the continuous operation of applications and services within the cloud environment.
• System maintenance and operations – ongoing maintenance tasks are vital to ensure the cloud environment operates efficiently. This includes system updates, software version upgrades, and applying necessary patches to maintain security and performance standards.
• Administration and monitoring – effective management of the cloud environment requires continuous administration, monitoring, and alerting systems. These processes help in promptly identifying and addressing issues, ensuring optimal performance and reliability.
• Training and skill development – as cloud technologies evolve, it’s imperative to invest in training programs to enhance the skills of IT staff. This ensures that the team can effectively manage and optimise the cloud infrastructure, keeping pace with technological advancements.
• Cost optimisation efforts – post-migration, organisations often face challenges like unexpected billing or inefficient resource utilisation. Implementing cost optimisation strategies, such as rightsizing instances or leveraging reserved instances, is essential to manage and reduce these expenses.

How long does a typical cloud migration take?

The duration of a cloud migration varies significantly based on the project’s scale and complexity.

In contrast, large-scale migrations involving complex enterprise systems, multiple data centers, and the refactoring of legacy applications may extend from several months to over a year. For instance, some large projects can take up to 16 months, especially when continuous testing and system improvements are necessary.

How can we ensure a cost-effective cloud migration?

Research by McKinsey & Company reveals that 75% of cloud migrations exceed their budgets, with over a quarter of enterprises experiencing cost overruns surpassing 20%. Collectively, these overruns amount to more than $100 billion in unplanned expenditures globally over a three-year span.

What’s more, 13% of companies report that their cloud migration projects extend three quarters or more beyond the anticipated timelines.

To manage costs effectively, it’s important to develop a detailed migration plan that includes a realistic timeline, resource allocation, and risk mitigation strategies. Engaging experienced professionals and leveraging automated tools can expedite the process, thereby reducing both the duration and associated costs of the migration.

Partnering with experienced professionals can significantly enhance the efficiency of your migration process. For instance, Future Processing offers a Cloud Cost Optimisation service that assists businesses in analysing, optimising, and monitoring their cloud resources. As certified partners of Azure and AWS, they provide preferential licensing rates and benefits, which can lead to substantial cost savings.

FAQ

What are the primary components that contribute to cloud migration costs?

Cloud migration costs primarily include infrastructure setup, data transfer, and application refactoring to ensure compatibility with the cloud environment. Additional expenses may arise from licensing fees for software and training staff to manage the new system effectively. These components collectively determine the total cost of transitioning to the cloud.

How do cloud service provider selections impact migration costs?

The choice of cloud service provider significantly affects migration costs due to differences in pricing models, available services, and support offerings. Providers may also offer discounts or incentives for migration, which can lower initial expenses. Selecting the right provider ensures cost efficiency by aligning their services with your organisation’s specific needs.

What hidden costs should be considered during cloud migration process?

Hidden costs in cloud migration can include data transfer fees, especially for large volumes of data, as well as expenses for refactoring applications to ensure compatibility with the cloud. Downtime during migration and the need for post-migration optimisation may also increase costs. Additionally, organisations should consider potential training expenses for staff and compliance-related costs to meet security and regulatory requirements.