12 Cost Considerations while Moving Data Center to Cloud

Gartner recommends, before moving Data Center to Cloud, to avoid undue cost overruns IT decision makers should engage cloud specialist partners in the planning and framework design phase. These specialist partners will help build cost scenario planning, over multi-year as infrastructure and operations move from legacy on-prem /data centers environment to cloud hosting options.

Over the years working with our largest customers, we’ve identified some common things people tend to miss when looking for ways to optimize costs and compiled them as best practices assumptions to help you build a robust cloud cost framework when moving Data Center to Cloud. These best practices will help while moving & making changes with the needs of your business, so you can get through any challenging and unpredictable times without getting a Sticker Shock.

Use these inputs to assess how hosting costs will change across different architectures over a multi-year time horizon. These considerations use the number of applications hosted by Infrastructure as a baseline to calculate how hosting costs will evolve as capacity moves from legacy environments to cloud-based architectures. These considerations can be used in two use case scenarios:

12 Considerations in Cost Scenarios Planning

Consideration 1. The configurations of small/medium/large applications are assumed. Note that an exact replication of On-prem measurements will not be an appropriate method for assumption. Right size Cloud requirements is a skill-based activity which will require expertise.

Consideration 2. The cost of On-Premise (Private Cloud) VM as a percentage of On-Premise (not hosted in Private Cloud) VM. (Assumption can be taken to be 70%).

Consideration 3. Organizations smaller in size spend more per employee and larger organizations spend less per employee but smaller organizations have a much smaller training budget than those larger organizations. There are a number of different ways organizations determine what their training budget for the year will be but one of the most common formulas for determining what dollar amount to dedicate to learning is using a percentage of what is being spent on salaries. The cost per hour for training an FTE to manage cloud resources (Assumption can be $80-100).

Consideration 4.The number of hours required to train an FTE to manage cloud resources (Assumption can be 40 hours). Determining what a full-time equivalent would be of your part-time staff along with the costs of training of your FTE will help you make decisions to engage experts.

Consideration 5. Cost of migration to the cloud includes all resources besides the manpower that you will use to execute the project. The average cost for an hour of migration effort (Assumption can be $80).

Consideration 6. The expected annual decline in cloud costs (Assumption can be 5%). Overall, there is a trend here of not just significantly declining prices, but also greatly increased capability (higher ECU and more RAM), and certainly reflecting an increased value to the customer. the cost of cloud storage continues to decline but in this specific instance the price reduction is enabled by giving IT organizations another cloud storage alternative

Consideration 7. It is assumed that additional staff training costs will be required as the hosting portfolio evolves. Infrastructure FTEs will require additional training to manage cloud servers. This estimate is calculated based on the number of hours required to train the administrators who would manage the additional cloud instances.

Consideration 8. It is assumed that moving data center to cloud (public: IaaS & PaaS) options will increase network costs. This is calculated based on the total data transferred for Public IaaS, Managed IaaS, VPC and fPaaS options. You will have to learn how to track and manage egress changes. Additional network costs have two components:

• Additional cost of internet data lines to the provider (Assumed to be 100 Mbps fiber line
• Additional cost for upgrading WAN. This is calculated by looking at the additional Mbps of WAN required if all the data transfer to the cloud is done uniformly over a year.

Consideration 9. The number of hours it would take to migrate a small/medium/large application to the cloud can be assumed. Depending on the complexity of the environment, size etc, this figure will have to be calculated. Rightsizing cloud requires expertise to help you optimize your cloud costs in the short to long term.

Consideration 10. Migration Costs are calculated based on a Year-On-Year increase in number of small/medium/large applications hosted on Public IaaS, Virtual Private Cloud, Managed IaaS, On-Premise (Private Cloud) and fPaaS.

Consideration 11. Enterprise discounting can also be considered. Along with enterprise discounting other incentives provided by cloud provider e.g Oracle Support Rewards saving upto 33% on current Oracle support expenditure when migrating to Oracle Cloud IaaS & PaaS.

Consideration 12. The percentage of cloud applications under development that will not incur migration costs (e.g. New Developments etc.) can be assumed to be 30%. Beyond the Free Tier, customers also get committed use discounts, software license portability, and rewards for Oracle cloud consumption. Key players like Oracle are implementing standard uniform pricing across all global regions. This approach simplifies cost management and eliminates billing surprises. Further Oracle customers get a discount of 25 cents for every dollar they spend on Oracle cloud. AWS combines the usage from all accounts to determine which volume pricing tiers to apply, giving you a lower overall price whenever possible. AWS then allocates each member account a portion of the overall volume discount based on the account’s usage.

Here at IT Convergence, we have an entire team of Solutions Architects dedicated to helping customers migrate and manage cloud operating expenses. With 1500 experts certified in migrating critical ERP applications onprem and reducing cost and maximizing ROI on your investments. Engage with cloud certified experts now!

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Here, at IT Convergence, we help our clients to extract the most value while planning and Moving Data Center to Cloud, also in terms of cost reduction if you go for cloud versus on-premise. We always try to understand the ultimate goals of your project and map out the best cloud architecture for you now, and scalable for the future. Moreover, we provide a comprehensive strategy on how to overcome major cloud migration challenges.

Engage with one of our cloud experts or schedule an assessment here.