Estimating Costs in the Cloud
One of the major factors when deciding to move to the cloud is running costs figures. This involves assessing the current IT infrastructure for costs to provide a comparison baseline. Afterward, the company can estimate future cloud infrastructure costs and actual migration costs for a particular application’s move into the cloud. This allows comparisons to the baseline costs to what the cloud version looks like.
Moving to the cloud means going away from all the hardware-related costs of managing rooms of servers towards a pay-per-use model with ongoing subscription fees. The bulk of ongoing costs for the cloud involves subscription fees, configuration changes, and training or new hiring.
In the context of assessing cloud migrations, many companies use the concept of Total Cost of Ownership (TCO) for comparing cloud solutions to the current state. Most cloud providers have built-in TCO calculators for forecasting future/proposed cloud implementation costs. For current on-prem implementation, these cost figures should be available via audits. TCO intends to uncover both the direct and indirect costs of owning and procuring certain assets or products. It includes a few key components:
• Acquisition/Physical Hardware costs
• Operations Costs
• Personnel Costs
The total cost of ownership calculation should be performed for each phase of ownership: acquisition, operation, documentation and training, and retirement.
1. Assess current IT infrastructure costs
a. Direct Costs. This refers to dollar amount costs that are directly reflected in the business balance sheets. These include hardware, software, contractors, warranties, supplies, network bandwidth, storage, database capacity. For direct costs, we also add operations costs. Examples of operating costs are maintenance labor, facilities maintenance/staffing/ real estate, utilities, and any other IT-related cost. Also, include any administrative costs related to maintaining the IT department running smoothly.
b. Indirect Costs. These types of costs are more difficult to estimate but equally important. Costs such as the loss of productivity suffered by employees and customers from infrastructure downtime. Other indirect costs relating to infrastructure include cooling costs, power, or infrastructure improvements. Indirect costs usually vary between different enterprises and implementations.
2. Calculate estimated cloud infrastructure costs
The current IT infrastructure audit, when implemented correctly, should provide enough information to compare to its prospective cloud implementation. This audit should give a clear understanding of the network, storage, and capacity needed to move current IT implementation to the cloud. Many cloud service providers offer their own calculators. Scenarios and details of an actual migration will vary, but these calculators will provide a rough idea of the monthly cost for which the company will need to budget. It is important also to consider that the cloud migration infrastructure may or may not be the same as the current implementation.
