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How to Calculate Cloud TCO before Migrating an Enterprise Application ?


Cloud computing can offer a range of benefits to business looking to modernize their applications and scale up their systems, to meet a growing consumer demand. The increased efficiency and agility is extremely appealing and there is little doubt that cloud technologies are the way of the future. But in order to implement this technology in a way that is most beneficial, it is important to know the cloud’s true cost of ownership (TCO) before you begin migrating your enterprise applications.

This TCO can be difficult to calculate as it relies on several different factors. It does not just depend on the business and the industry it is in, it also depends on factors like the skills of the employees, supported processes, and previous investment in hardware, software and facilities.

Fortunately, there are a few steps you can follow to begin determining the exact cost of migrating your business applications to the cloud.

1. Audit Current IT Costs

It is important to understand the size, scale and cost of your current operation. Taking a closer look at what your costs are right now and how your systems are presently set up will give you a base for what your cloud systems and costs might look like. Consider the big picture when making these calculations and include both your direct and indirect costs.

Direct Costs

Direct costs should be easy to calculate. Dive into your accounting to find things like the costs of your hardware and software, server costs, software licenses, warranties, maintenance, supplies, and any other costs that go in to supporting your current operation. Do not forget to account for the labor that is required to maintain your servers and your technology. Include the costs of facilities that house your IT, like rent, utilities, staffing, Internet connectivity costs, anything that can be attributed to the upkeep of your IT. Factor in administrative costs from other departments. Many internal and external resources go into your current IT systems and they need to go into your final calculations.

Indirect Costs

Indirect costs can be a little more difficult to determine. Your indirect costs include things like the loss of productivity and revenue when your IT system goes down. These numbers are more likely to be an estimation but they are incredibly important. Look at your logs and see how frequently your system goes down and for how long. Multiply those lost hours by your average hourly rate.

While you are auditing these costs, it is also a good idea to gather information on the details of your current IT infrastructure. How much bandwidth, storage, and database capacity are you currently using? How many servers do you have? These kind of details will be used in the next steps of your TCO calculations.

2. Calculate Estimated Cloud Infrastructure Costs

Now that you know what you are currently paying and the details on your current usage, it is time to calculate your potential cloud infrastructure costs. Because this is a complicated process and no two businesses will have the exact same needs, many companies have created TCO calculators to make work a little easier. This AWS TCO calculator is a good place to start. On its advanced setting you will be able get an in depth look at what your costs are likely to be. Begin by inputting all the information related to your existing server and storage usage. Next you will be asked to enter the details of your network and IT labor. Once you have completed this process, the calculator will generate a report that will give you a three-year TCO comparison by cost categories. By downloading the full report, you will be able to see a detailed cost breakdown. AWS also provides a useful monthly cost calculator. If you have a solid idea of what cloud components you will require to effectively run your enterprise applications, this calculator can help you determine what your budget needs to be moving forward.

3. Estimate Cloud Migration Costs

Now that you know what your current and potential costs are, it is time to look at the costs associated with migrating to the cloud. These costs will depend on the size of your current infrastructure and how much of it you plan on migrating. Here is what you need to consider when estimating these costs:

Moving data

Moving data to the cloud is one of the most important steps in this entire process and cloud providers charge fees for this transfer. You also need to account for any labor costs associated with ensuring that your data is properly synchronized once you deploy to the cloud. In all likelihood your business will continue to use your applications during the migration process so care must be taken to ensure that the data stored on-premise does not become out of sync with the data stored in the cloud. The amount of labor and effort this requires will depend on the size and complexity of your applications but it is a crucial part of a cost analysis.

Integration and testing

Not every application is ready for migration to the cloud. Some of them may depend on, on-premise servers or legacy software to function. These apps will need to be tested to ensure they are working properly and those labor costs need to be considered in this estimation and future budget planning.

Consultant fees

Many companies do not have the in-house expertise to migrate their enterprise applications to the cloud which means an outside cloud expert needs to be employed. Recruiting a team of outside experts can be a great asset. They can help map strategy, test applications, integrate the cloud with on-premise servers, build your cloud structure, and perform the migration. Carefully examine your overall cloud needs, and what you may require from an expert, then estimate these costs accordingly.

4. Consider Post Migration Costs

Once the migration is complete, there will still be regular costs. You’ll have your monthly costs that you estimated earlier but you’ll also have to consider training, continued integration and testing, security, compliance, and administration.

Once you have calculated your TCO, you will likely be left with a price that is less than what you currently pay. However, the cloud can offer your business more than just reduced costs. The cloud will enable you to easily scale up your business to meet demand and it provides the required agility to roll out product developments and improvements in a way that ensures continuous delivery and no losses in revenue or customer experience. It will also give you access to real-time data and resources that may have otherwise been unavailable to you. These intangible benefits will keep you stay competitive and ahead of the curve, allowing you to keep your customers and clients satisfied inevitably leading to increased revenues over time.


Market Research, RapidValue

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