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.
Key Takeaways
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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:
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1. Scenario Planning |
2. Analysis Development: |
| To build an overview of the hosting costs change based on how an organization expects its hosting portfolio to evolve over a multi-year time horizon | To provide a base platform for organizations to customize or build their own analyses |
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.
| Small Applications | Medium Applications | Large Applications | |
| VMs for Computing
VM’s for Database |
Production
QA Integration Staging Development DRs Storage Requirement (GB) |
Production
QA Integration Staging Development DR Storage Requirement (GB) |
Production
QA Integration Staging Development DR Storage Requirement (GB) |
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%).
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).
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.
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).
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
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.
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:
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.
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.
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.
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.
1. How much does it cost to migrate a data center to the cloud?
The cost of migrating a data center to the cloud depends on infrastructure size, application complexity, data volume, cloud provider, and migration strategy. Major expenses include workload migration, computing resources, storage, network connectivity, software licensing, and employee training. A detailed cloud migration cost assessment helps organizations estimate upfront expenses and ongoing operational costs.
2. What are the hidden costs of cloud migration?
Hidden cloud migration costs can include data egress fees, network upgrades, application modifications, additional security tools, monitoring services, employee training, and temporary infrastructure duplication. Organizations may also incur unexpected expenses from overprovisioned resources and ongoing cloud administration. Identifying these costs during migration planning helps prevent budget overruns.
3. Is moving a data center to the cloud cheaper than maintaining on-premises infrastructure?
Moving a data center to the cloud can reduce hardware investments, infrastructure maintenance, and facility-related expenses. However, cloud hosting is not automatically cheaper. Actual savings depend on workload utilization, resource allocation, licensing requirements, and ongoing management costs. Comparing the total cost of ownership of cloud and on-premises infrastructure helps determine the most cost-effective option.
4. How do you calculate the total cost of ownership (TCO) for cloud migration?
Cloud migration TCO is calculated by combining one-time migration expenses with ongoing cloud operating costs over a defined period, typically three to five years. These costs include compute, storage, networking, software licenses, support, security, monitoring, and administration. Comparing this amount against projected on-premises infrastructure costs helps businesses evaluate the financial benefits of migration.
5. How can businesses reduce data center to cloud migration costs?
Businesses can reduce cloud migration costs by right-sizing computing resources, eliminating unused infrastructure, prioritizing suitable workloads, and selecting appropriate cloud pricing models. Additional savings may come from committed-use discounts, existing software license benefits, and automated resource management. Conducting a cloud readiness assessment before migration can also help identify opportunities to minimize unnecessary spending.
6. How do data transfer and network charges affect cloud migration costs?
Data transfer and network charges can increase both initial migration expenses and recurring cloud operating costs. While inbound data transfers may be free with some cloud providers, outbound transfers, cross-region traffic, and dedicated connectivity can generate additional charges. Organizations should estimate data movement volumes, application communication patterns, and bandwidth requirements to avoid unexpected expenses.
7. What factors should businesses consider when choosing a cloud provider based on cost?
Businesses should compare cloud providers based on compute and storage pricing, network charges, software licensing, support fees, discount programs, and workload requirements. They should also evaluate scalability, availability, security, and long-term management costs. For organizations running Oracle workloads, Oracle Cloud Infrastructure pricing, license portability, and eligible Oracle Support Rewards benefits may influence the overall cost comparison.
