Six Elements to Calculate the Cost of Cloud Migration Project

May 26, 2021

IT leaders planning a cloud migration must determine how much of the total effort associated with cloud adoption belongs in the migration estimate as opposed to a larger “digital transformation” business case. Along with this they have to account for chances of overshooting their planned budget to over substantial cost overruns.

In this blog learn and resolve:

  1. Six Cloud Migration Cost Categories
  2. Six Reasons for Overshooting your Cloud Migration Budget

Six Cloud Migration Cost Categories


Planning and Oversight  Redevelopment  Migration
 Interim Operation  Transformation

 Residual (Sunk) Costs

If the migration is for a mission critical application in-house such as ERP, Oracle EBS, etc., it would be wise to engage early on, certified experts for application and cloud both to help identify potential roadblocks and ensure success on each and every stage of the migration journey. You need to rigorously assess the capabilities of the migration partner with capabilities to solve your long term digital transformation needs.

In case you have not yet assessed the life cycle of your mission critical application to cloud migration, you can read this eBook which shall give you deep insight before proceeding do a cost estimate analysis

Migration Cost Category Key Activities to Be Costed
Planning and Oversight The first cost in cloud migration cost estimation is the Planning and Oversight. Also known as the discovery and planning phase. Key decision makers should engaged with the long term view, & also engage with strategic partners/vendors. An internal assessment is done to map against various available options for cloud migration.

  • Migration business case development and approval
  • Initiative resourcing, including vendor evaluation and selection
  • Program and project management
  • Technical oversight and quality control
Redevelopment The most critical early phase in a cloud migration project is application assessment. This phase will determine which cloud migration approach should be used for each application. Rehost (Lift and Shift), Revise, Rearchitect, Rebuild, Replace considerations in this phase.

  • Application redevelopment: Application and database redesign, testing and release management for cloud, instrumentation for cloud monitoring and management
  • Data cleansing, restructuring and redistribution
  • Implementation and maintenance of development and testing environments (tooling, process, infrastructure) from design and provisioning to operations and maintenance
  • Network and security redesign for “hybrid cloud” integration and automation between cloud and on-premises environments
  • Design and implementation of cloud management and governance infrastructure
  • Integration of redeveloped applications with legacy data and systems, and with other cloud systems (for example, SaaS applications)
  • Redevelopment program and project management
Migration The actual cost of moving the application from its existing location to the cloud. If your staff doesn’t have the expertise or time to handle app redesign/ migration, you may have to outsource some of the tasks to third-party certified partner companies. Oracle has few select certified Cloud Service Provider Expertise (CSPE) who can consult, build, deploy, migrate and manage Oracle and Non-Oracle workloads, and all your cloud efforts in a single contract.

  • Application assessment, including discovery of all on-premises workloads and dependencies between them, the selection of migration approaches, specification of target cloud infrastructure for each workload, and the detailed estimation of migration effort
  • Cloud “landing zone” setup including account structure, federation to identity directories, virtual private cloud (VPC) networking, role-based access control (RBAC) roles and rule sets, and infrastructure for monitoring, security and configuration management
  • Migration readiness including migration grouping, phased migration planning and scheduling, downtime planning, communication and coordination planning
  • Migration execution (for each phased group) including data migration and replication, server transfer, testing, cutover, and transfer of operations to ongoing support
Interim Operation The amount of “interim” cloud operations costs to capture in a migration cost estimate (as opposed to the ongoing cloud operations budget) is the amount incurred during “transition” from running a workload on-premises to running it fully in the cloud. This period covers operational setup as well as interim operations itself. This period typically ends when ongoing support for a cloud workload is moved to a permanent cloud ops team.

  • Service request management
  • End-user training and support
  • Cloud resource configuration management, patching and version control
  • Monitoring, logging and operational analytics
  • Automated, templated orchestration of common operations (provisioning, scaling, backup, recovery, updating)
  • Billing, cost and chargeback/showback management
  • Migration automation tools and infrastructure
  • Backup and disaster recovery
  • Identity and access management
  • Security and compliance
  • PaaS platform ops (management of infrastructure and tooling related to continuous integration and continuous delivery of custom applications and services)
  • Interim cloud IaaS, PaaS and SaaS platform service charges
Transformation Transformation costs to watch for include the cost to reskill existing teams, the cost to raise salaries to match market levels for cloud roles, changes to organizational structure and operating procedures, and the cost to adopt agile DevOps practices across the IT organization. For organizations intending to “outsource” their cloud operations, the costs to onboard and establish a managed service provider (MSP) can be considered a transformation cost.

If you want to achieve operational cost optimization, in conjunction with extrapolated value and several other benefits, seek services from Oracle MSE who can provide all Oracle Cloud services in a single contract and single point of contact.

  • Adoption of cloud governance policies, both manual and automated
  • Adoption of a “cloud operations model” for service delivery and assurance
  • Retraining, reskilling and reorganization of personnel to support cloud operations
  • Cross-team integration between IT and business units
  • Adoption of agile development methodologies
  • Adoption of DevSecOps processes for continuous integration, security and delivery
  • Supplier, partner and key customer transition management
Residual (Sunk) Costs Common residual (sunk) costs from a cloud migration include losses in productivity due to vacated facilities and hardware, unused software licenses or unproductive staff. It can also involve the cost to run duplicate versions of the same system during a migration cutover period.

  • Unreusable facility and infrastructure capacity vacated by migrated workloads
  • Unreusable software licenses not transferable to public cloud
  • Underutilized personnel during or after migration
  • Unrecoverable colocation and outsourcing costs
  • Asset disposition costs (data destruction, recycling, etc.)
  • Operational redundancies (the cost to run “concurrent” versions of the same system on-premises and in the cloud for an interim period)

Six Reasons for Overshooting your Cloud Migration Budget

A large-scale cloud migration project work closely with the finance department to forecast and align migration and operational funding for cloud applications across budget cycles. Under pressure to move quickly to cloud through application assessment often means failing to consider critical costs that might become bottlenecks enroute to the cloud migration project on the way.

In the planning phase these Six reasons should be accounted for to ensure you avoid any cost overruns.

Reason 1: Wrong Team Selection for Cloud Migration

Untrained Staff? Engaged with an Inexperienced Partner? You’ll need a whole team of specialists, with experience to execute a successful cloud migration project. Your existing team may or may not be certified to migrate critical applications. However, if they have not handled situations where a large-scale project needs to be executed within aggressive deadlines, say migrate the entire data center in 6-8 months, you will hit several roadblocks on the way, where the risks are very high.

Technical Skills which may be required in a Cloud Migration project
  1. Infrastructure as Code (IaC)
  2. Kubernetes (K8s)
  3. Artificial Intelligence (AI)
  4. Cloud Environments
  5. Scrum Methodology
  6. Software as a Service (SaaS)
  7. Data Engineering
  8. Continuous Integration/Continuous Delivery (CI/CD)
  9. DevOps
  10. Platform as a Service (PaaS)
  11. Database Management 
  12. Agile Software Development
  13. Application Programming Interface
  14. Machine Learning
  15. Python
  16. Cloud Architecture
  17. Automation
  18. Data Integration
  19. System Integration
  20. Application Security

Reason 2: Wrong Emphasis for Application Priorities

Too Much and Too Quick to “Lift and Shift” or Too Little “Adapt to Cloud”? Several customers struggle to develop a cloud transitional roadmap as they fail to answer 1) When to 2) How much 3) Upgrade 4) Cleanup etc., Thus keep adding to costs as they continue in their cloud migration journey. Migration activities are difficult to reverse, and a poor migration strategy risk increased costs and causes project delays.

Reason 3: Poorly Timed Work Effort

Costs Aren’t Incurred When Expected? Budget Realignment Delays? You would not want to run back-and-forth to your management for approval of Budgets or keep justifying to why you missed out critical patches required to be updated before the migration.

Rushed Application Assessments, failing to fully assess the data center workloads to be migrated, resulting in incomplete specification of migration requirements and downstream scope creep.

Poor planning leads to failing to discover and account for the interdependencies between on-premises systems being moved, resulting in incorrect grouping and ordering of application migrations, network performance issues and cascading delays.

Reason 4: Rushed Application Assessments

Missed Interdependencies? Wrong Migration Sequencing? Migrating applications without understanding the complexity of operating on the cloud? Many organizations fail to grasp the integration and dependency complexities of moving existing applications to the cloud. Moving a large section of the application portfolio to the cloud without proper assessment increases the risk of migration failure.

Failing to fully assess the data center workloads to be migrated, resulting in incomplete specification of migration requirements and downstream scope creep.

Reason 5: Poor Right Sizing Efforts

Hard to Manage and Secure? Higher Operating Costs? Under-sizing or over-sizing will affect the availability, performance and functionality of your application and will require requisite skill as On-Prem ≠ Cloud. All of the architectural components carry a cost tag. Allocation-based services require that you request a specific allocation at provisioning time. Poor Landing Zone Design will lead to failing to properly architect and implement the underlying cloud “landing zone” environments into which workloads are migrated, increasing the costs of security and compliance. A well-architected environment where workloads, servers, and resources can live when hosted within the cloud.

Reason 6: Unaccounted Hidden Indirect Costs

Organization Transformation? Residual Costs? Omitting the indirect costs of cloud migration, such as organizational transformation costs and the residual (sunk) costs of vacated data center capacity, that must be absorbed in other organizational budgets. Compute prices that don’t autoscale, Bulk storage discounts, Network egress charges, proprietary migration tools or licenses for compliance etc can add up on the journey as indirect costs too.

How to Resolve?

Download the eBook to Learn More!


After the perpetual No. 1 question (“Is the cloud safe?”), one of the most frequently cloud questions asked by customers is: “Is the cloud really cheaper?” In many cases the answer won’t be yes, and answering it requires a nuanced approach, as total cost depends on the type of cloud service and the characteristics of workloads and on the specific circumstances of the enterprise.

Above estimate analysis might look overwhelming and should not dissuade you from taking a decision to migrate to cloud. Properly planned and timely engagement of experts will ensure you are able to achieve your short term and long term digital transformation goals.

Achieve the most cost effective approach to your cloud migration project, avoid all road blocks on the way and Get First-Time-Right solutions, by leveraging the experience of our cloud experts.

Subscribe to our blog

Related Posts