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How to Calculate Cloud Migration Costs and Avoid Overspending?

How to Calculate Cloud Migration Costs and Avoid Overspending?

How to Calculate Cloud Migration Costs and Avoid Overspending?
date_range - 6 days ago

Even though cost optimization is undoubtedly one of many cloud migration benefits, we need to understand cloud migration cost structure.

Some expenses such as cloud maintenance and recuring are simple to predict and calculate. Others, such as refactoring costs, are much harder to estimate.

Let's dive in and talk about cloud migration costs structure!

On-premises Costs

Our first step begins with an assessment of the existing hardware and software assets. After this assessment, we need to find comparable cloud offerings and compare the two.

This comparison is not so simple, though. The problem lies in the fact that on-premise resources and cloud resources use different cost models. On-premise resources require significant upfront investment - Capex-based cost model. Cloud resources generally do not require upfront investment; they are paid based on consumption - Opex-based model. To compare Capex and Opex, we need to divide Capex costs with the expected infrastructure lifetime. Although this comparison is not exact (it does not consider possible component upgrades and replacements), it represents a good baseline estimate for the comparison.

Certain services (such as network switches) and expenses (such as electricity and physical site security) are eliminated in the cloud. We need to identify those types of costs and consider them when comparing on-premise and cloud costs.

Refactoring Costs

Lift and shift is the simplest cloud migration strategy if we talk about cost estimation. With this strategy, we take on-premises workloads and migrate them to the cloud as they are. The cost estimate is simple to calculate because we use simple services with straightforward pricing models.

Things become much more complicated if we want to utilize special cloud services that require workload refactoring. For example, maybe you want to refactor a monolithic app to microservices and utilize lambda functions. These changes can be timely and expensive. Also, specialized cloud services may require additional maintenance and operating costs. But in the long run, these changes are usually worth the cost.

Cloud Infrastructure Costs

After we analyzed on-premises costs and determined migration costs, we need to calculate the cloud infrastructure cost. The challenge here is the complex pricing model in the cloud. Resources in the cloud can be paid based on the consumption or upfront, or they can be combined as well. Also, higher consumption usually means a lower price per unit.

Cloud providers such as AWS offer pricing calculators that help us precisely predict your cloud infrastructure costs.

Cloud Operation Costs

Cloud operation costs vary depending on your team's knowledge; if you need additional people to operate the new environment, this means the total cost will be higher.

Cloud encourages the use of automation - specific repeatable and manual tasks, such as deployment or scaling, can be fully automated. This automation also helps eliminate the possible errors; once the procedure is established, it can be repeated as many times as needed without any risks. However, the setup of these automation means that cloud implementation costs will be higher.

Infrastructure Write-off

If you decide to move your whole on-premise environment to the cloud, this means that your existing on-premise infrastructure is no longer needed. It is good practice to consider the value of the infrastructure you are writing off, especially the one that is not at the end of its useful lifetime. This estimation can help you decide to adopt a hybrid cloud model until your existing infrastructure comes to the end of its lifetime, or maybe you can even repurpose or sell it.

Conclusion

Calculating cloud migration costs is not simple as it sounds. First of all, we need to assess the cost of existing hardware and software resources. The second thing is to determine cloud migration costs - choosing a refactoring strategy helps you utilize many cloud benefits but also requires more work in the migration process. Other cloud migration strategies are much more simple in terms of cost calculation. We also need to calculate the cost of cloud services for our workload; here, we use tools such as AWS pricing calculator. Additionally, we need to add cloud operation costs; they depend on the level of automation and your team's level of knowledge. Lastly, we also need to take into account the value of the hardware that will be terminated.

As AWS Advanced Consulting Partner, we help companies of every industry and size solve their infrastructure problems with cloud migration.

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