Mar 06 2020

How to Accurately Estimate the Cost of a Cloud Migration

Many organizations underestimate the true costs of moving to the cloud, but it’s possible to effectively and accurately plan for a migration.

By turning to public clouds from providers such as Microsoft’s Azure and Google and using private clouds, state governments provide cost savings by reducing redundant infrastructures, boosting reliability through more robust centralized infrastructures and simplifying management.

Yet the cost of a cloud migration is one of the key elements in a shift, something that is especially true for state and local agencies often operating under tight IT budgets. It is also a thorny challenge for both CIOs and line of business leaders, including finance departments. 

“There is a tendency to underestimate the expenses incurred by the full process,” IBM notes in a 2019 article. “With that in mind, make sure to not only consider the costs of migrating workloads but also the tools and services involved in the transition.”

Other considerations IT leaders need to take into account include necessary investments in “network connectivity to handle increased bandwidth demands and post-migration costs to run workloads in a cloud environment,” IBM notes. “While cloud migrations reduce upfront costs when adding new technology, the cloud-based model of technology consumption generates new and ongoing costs that require planning and budgeting.”

Most Organizations Underestimate the Costs of Cloud Migration

A 2017 Forrester Research study, “Due Diligence Is the Cornerstone of Public Cloud Migration Success,” found that many organizations fail to properly budget for cloud migration, often missing the need to treat costs as an ongoing, rather than finite, expense. 

The report found that less than 40 percent of firms were able to predict cloud platform costs, with 58 percent claiming run costs were higher than estimated. Organizations also underestimated nonplatform costs, such as people and tools, associated with running and maintaining service quality on a public cloud, according to the report. 

The study polled 108 U.S. decision-makers responsible for public cloud (Infrastructure as a Service) strategy at firms migrating workloads to public cloud.

“A major component of dissatisfaction with public cloud migration is cost complexity,” the Forrester report notes. “Cloud platforms promise greater agility and flexibility using dynamic cost structures to align spend with usage. While this pay-per-use model has the potential to curb spend on transient workloads, unpredictable user patterns translate to unpredictable costs.”

While 69 percent of firms claimed to leverage cost modeling and scenario analysis tools, 46 percent of firms said they required additional tools to increase performance visibility.

To better plan cloud migration costs, state and local agencies can use online cost calculators from vendors such as IBM and Microsoft. Such tools allow IT leaders to understand the compute model and other options relevant to the cloud migration process.

MORE FROM STATETECH: State and local agencies can turn to the federal government for guidance on accelerating cloud adoption.

Agencies Can Methodically Budget for Cloud Migration Costs

“Financial planning is critical to successful cloud migration,” IBM states. “When setting a budget, be sure to factor in current costs associated with the workloads being moved as well as the expense of moving those workloads and running them in the cloud. Proper budget planning also benefits from clearly defining project goals and setting a realistic timeline for migration.”

Consultants, cloud service providers and financial experts can help agencies conduct the necessary assessments and prepare accurate cost projections, IBM states. 

Meanwhile, the U.S. General Services Administration offers a series of best practices federal agencies should undertake when moving to the cloud, most of which can be applied to state and local government.

“Though this may be common sense, you truly do need to understand why moving to the cloud makes sense for your agency!” the GSA notes. “Ensure that your software architects support and partner with your acquisition team to understand cloud technology, pricing models, and how to accurately calculate visible and hidden costs.”

The resulting cost-benefit analysis should help identify the agency’s available options and lay out cloud migration roadmap. 

IT leaders also need to “strike the right balance between locking in long-term with vendors and contracting for longer periods to reduce costs,” the GSA argues. 

“Try not to get stuck with a vendor that may sunset support for a service your organization is taking advantage of,” the GSA states. “On the flip side of the coin, it’s possible to reduce your cloud bills significantly by leveraging reserved/spot instance models. These are longer term commitments to purchasing reservations of capacity. Try to find the sweet spot; ask the vendor the right probing questions up front about how you anticipate your cloud needs changing (if at all) vis a vis the CSP’s products in the coming years.”

Cloud service providers are continuously changing, updating and adding service offerings, and agencies need designated staff members to keep up with the changing market, GSA adds. 

The GSA also urges IT leaders to tie their cloud migration to a business initiative and their agencies’ missions.

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