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Monday, May 29th, 2017

Cloud

Calculating the true cost of migrating to the cloud

How to calculate the true cost of migrating to the cloud

While there are a number of things to consider when you’re contemplating a move to the cloud, cost is certainly high on the list. But calculating the cost of a migration is harder than it looks. Here’s how to do it right:

1 Audit your current IT infrastructure costs.

A thorough understanding of the scale of your current operations is imperative, and an infrastructure audit is the first thing you should do. The audit will reveal what you’re currently paying to run IT and what your new cloud environment might look like.  This baseline will help you flesh out the potential cost of the cloud resources you’ll consume.

You should take a holistic approach and consider the total cost of using and maintaining your on-premise IT investment over time, and not just what you pay for infrastructure. This calculation will include direct and indirect costs.

* Direct costs.  Direct costs are relatively easy to calculate, as they directly hit your balance sheet. The first bucket of direct costs include the hardware and software. How much do you pay (or have you paid) for your physical servers, software licenses, maintenance contracts, warranties, supplies, material, spare parts, and anything else?  All of these costs should be fully documented, and you can access them by having your accounting department pull invoices, purchase orders and payment records.

While you’re in data gathering mode, you should also figure out how much network bandwidth, storage, and database capacity you consume with your servers and other technology.  Also, it will be important to identify the details of your infrastructure, such as the number of servers you use, types of databases you use and storage capacity. You’ll use this information when calculating your estimated cloud infrastructure costs in upcoming steps.

The second type of direct costs are operational costs. These can include:

  • Cost of labor for maintenance of your servers, databases and other technology
  • Cost to maintain the facilities that house IT hardware, such as real estate, staffing, and other facilities-related costs
  • Cost of connectivity to the internet
  • Any other costs that can be attributed to the care of your IT

Finally, you should include the administrative costs necessary to maintain your IT department.  These can include the resources from other departments in your organization - Human Resources, Procurement, Finance, to name a few - that are dedicated to managing your internal and external IT staff.

You may consider these costs to be peripheral, as they may not hit your IT department’s balance sheet directly. But the hiring, onboarding, training, and management of IT employees and external consultants can get expensive, and other departments are dedicating many resources to do so. Thus, these costs should be considered within the purview of the cloud migration.