Cloud Migration Costs and Other Things You Did Not Know

Summary: Cloud migration is getting more relevant with every passing day for companies that require a scalable and flexible solution. But it also has its share of challenges and cost considerations. In this blog, we will understand the cloud migration costs, the factors influencing it, how to estimate it, and tips to reduce it, amongst much more. So, get reading to gain valuable insights.

Companies are increasingly wasting more time discussing how to expand the server's capabilities rather than spending that time improving the software codes. Many of these companies have already taken a call to move their operations to a better cloud infrastructure. But this process is much easier said than done.

The cloud migration services market is expected to increase from $10.2 billion back in 2023 to an astounding $29.2 billion by the end of 2028, at 23.3% CAGR (Compound Annual Growth Rate). This throws a fair amount of light on the current scenario. Several factors will drive the increasing demand for cloud services, such as flexibility, lower costs, security, and agility.

Not only this, almost 60% of businesses claim to have simplified IT operations and management due to cloud migration. Cloud migration is a complicated and challenging process. Hence, it is imperative to strategically and holistically determine the cost of cloud migration and the benefits. So, let’s dive deep into the fundamentals of understanding the dynamics of cloud migration costs.

Is Your Business Lacking Scalability, Security, and Innovation? Migrate to Cloud for Immediate Business Results

Contact Us Today

Areas of Cloud Migration Costs

There are considerable costs involved in moving to the cloud. Based on the on-premises data center, you may have to spend the IT budget on the latest hardware upgrades, new software licenses, maintenance, support, and other related factors. Likewise, moving to the cloud infrastructure means you need to get into cloud application development, which involves investment.

There are some primary areas of costs involved in cloud application development and migration. It is imperative to understand the current pre-migration expenses and compare them to the future costs to clarify the cloud migration costs. There would also be the actual cost of cloud migration – the effort and hard work it takes to move applications from the on-premises to the cloud.

1. Pre-Migration Costs

To present an accurate cloud migration estimation, it is essential to gain complete details about the present on-premises expenses and system performance data. It is crucial because it would allow you to determine the correct cloud infrastructure size and provide a near-accurate comparison highlighting the cloud's current and future costs.

The costs include on-premises data center expenses like rack infrastructure, servers, power, electricity, storage, IT labor, and network. Expenses related to the hardware specifications and maintenance, new hardware, software licensing, support costs, purchase contracts, warranty expiration, labor contracts and costs, running processes, system performance, network connections, system updates, and application updates.

2. Post-Migration Costs

Cloud migration estimation involving runtime costs of migrated applications is important. Noted below are some of the estimated post-migration costs:

• Monthly/annual infrastructure and software costs involving licensing and support
• System operations and maintenance costs
• Administration
• Monitoring
• Alerting
• System updates
• Software version patches and updates
• Training

3. Cloud Migration Costs

When you consult a cloud integration service provider, it would be best if you keep these pointers in mind:

• Cost of application migration, including the real cost of moving an application from the present location to the destination cloud.
• Application code, infrastructure, and configuration changes are required before moving to the cloud. These are also called refactor work.
• Application refactors are to be done before migrating to the cloud to ensure that it works in the cloud.

Explore How We Can Help You with Assessment Consulting to Migration and Maintenance

know more

Major Factors That Could Influence Cloud Migration Costs

Cloud migration costs can be different for different organizations because of a certain factor affecting it. The following are a few major factors that could influence your cloud migration cost to be more or less. Check them out.

1. Technical Expertise and In-House Skills: The costs of cloud migration may vary depending on the availability of skilled technical personnel. Businesses can develop internal teams or outsource to third-party firms for migrating systems to the cloud, impacting overall costs. Internal training also adds to the expenses, but investing in in-house training can be beneficial in the long run. On the other hand, hiring consultants can speed up the process but may cost more. Balancing these options is crucial for effective cost management during the migration process.

2. Licensing Costs: Software and licensing costs are a significant part of the overall expenses when migrating from traditional IT infrastructure to the cloud. Renewing or procuring new licenses for existing applications to make them compliant with the latest delivery model is essential. Additionally, budgeting for recurring costs of subscription services for cloud-hosted software is important, as these costs can accumulate over the years and impact long-term budgeting.

3. Downtime and Operational Disruption: Business disruption during and after migrating to the cloud has substantial cost implications. Temporary disruption of operations can lead to reduced efficiency and profits. Therefore, meticulous planning and testing are essential, even though they increase the costs associated with migration. However, these steps contribute to efficiency and help the business avoid prolonged outages.

4. Security and Compliance Requirements: Ensuring data security during and after the migration increases the overall expenses. Addressing legal compliances may require specific software solutions and assessments, adding extra costs. However, these measures are crucial to avoid penalties and infractions.

5. Data Backup and Recovery: It's crucial to create and maintain safe copies of digitized information to prevent loss during migration. Additionally, compliance and data checking after migration ensure that Disaster Recovery Plans (DRPs) provide added security to avoid data loss, which is essential for business recovery.

6. Consulting and Professional Services: While hiring a cloud consultant can benefit cloud migration strategy, planning, and execution, it can also be expensive. Consultants may recommend changes that could initially cost more but offer long-term value and a smoother migration process.

7. Data Volume and Complexity: The volume and complexity of data significantly impact migration costs. Higher volumes require more resources for movement and storage, while complex data structures may necessitate costly migration approaches. Effectively managing data volume and complexity throughout the migration process is crucial for controlling costs.

8. Long-Term Product Strategy: When migrating, it's essential to consider the future of the product. Anticipating future growth and scalability needs can affect initial costs, as preparing for these elements may require a more significant initial investment. Additionally, upgrade and maintenance costs for the specific cloud environment contribute to expenses, making long-term planning critical.

9. Migration Timing and Scheduling: The timing of migration can also impact costs. Time constraints may require hiring more people or speeding up processes, increasing expenses. Potential revenue loss during peak business times is another cost to consider, making timing a significant factor in overall expenses.

How to Calculate Cloud Migration Cost?

Here, we present you with three straightforward steps to accurately calculate the cloud migration cost for your business. Take a look.

Step 1: Audit the Present IT Infrastructure Expenses

An in-depth understanding of the current operations is critical to assess the costs involved. Infrastructure auditing is one of the first things to do. An audit would reveal the status of IT costs and the future costs of a cloud environment. With this analysis, you can further analyze the potential expenses of cloud resources in the future. Here, it is vital to approach holistically and consider the costs of using and maintaining the existing IT investments in due time. The calculation must include both direct as well as indirect costs.

• Direct Costs: It is relatively easier to calculate the direct costs, as they are glaring in the balance sheet. Direct cost begins with the hardware used and the software engaged in running the show. The cost of physical servers, licenses of the software, warranties, maintenance costs, materials, spares, and everything else that immediately affects the budget should be added here. Ensure these costs are documented thoroughly, and your account department can access them by pulling invoices, payment records, and purchase orders.

Besides, you must consider the network bandwidth, database capacity, and storage consumed with the servers, along with the necessary technology. Identify infrastructure details like the total number of servers, database types, and total storage capacity. Using this information, you can calculate the estimated infrastructure costs of moving to the cloud.

Next comes operational costs, including labor costs to maintain servers, databases, and technology used; the cost of maintaining IT hardware facilities like real estate and staffing; the cost of internet connectivity; and other costs attributing to IT care.

Finally, include administrative costs to maintaining the IT department. It has all the resources engaged from various departments in the organization, such as HR, finance, procurement, etc.

• Indirect Costs: On the other hand, indirect costs are difficult to sum, but they are equally important. The most significant indirect cost is productivity loss. It happens when the IT infrastructure is compromised. Calculating these costs, however, is a herculean task. You have to review old log files to understand how often the servers were down and how many minutes were affected – multiply the time by the average rate (hourly). Add the estimate of revenue lost.

Step 2: Estimate The Cloud Infrastructure Cost

Once you are ready with the present infrastructure costs, calculate the potential cost of cloud infrastructure. The audit should help you understand the network, database capacity, and storage you require to run your applications in the cloud.

Although cloud costs are incredibly complicated, infrastructure service providers are now offering a simplified pricing structure to understand customers easily. Many cloud cost estimate calculators are available to help you with a fair idea of the costs, regardless of the cloud provider's choice.

A basic calculator allows you to input some of this information:

• Type of server
• Number of machines (virtual)
• CPU cores
• Memory (GB)
• Guest OS, Hypervisor, DB engine Alerting
• Type of storage
• The raw capacity of storage
• Infrequent percent accessed

Some of the advanced calculators can let you add more details about Servers, Storage, etc.

Once you submit all this information, the calculator generates a report summarizing the cost in categories with a detailed breakdown.

According to a report, 20% of enterprises spend more than $12 million every year on public clouds. Click To Tweet

Amazon Web Services (AWS) has the Total Cost of Ownership (TCO) Calculator and a detailed monthly cost calculator. You can use it to get your estimates.

Step 3: Estimate Cost of Cloud Migration Execution

In the next step, you have to account for all the expenses involved in executing IT operations' migration to your destination cloud. The scope of present IT infrastructure and the volume of data you want to move to the cloud will also contribute to the migration process's cost. Consider the following components to calculate the costs of migrating to the cloud:

• Moving Data: The first step is to move your data to the cloud. Cloud application development services charge fees to transfer data to the systems. Also, account for the labor to ensure your organization's data is adequately synchronized once deployed to the cloud. It is because you would want to continue using the application when cloud migration is still in progress. Ideally, you must spend your time and resources to ensure the data in your existing systems are not discordant with that of the data in your cloud.
• Cloud Integration & Testing: Not all applications are cloud-ready. Check your cloud integration services. Whether you are migrating an extensive ERP system with many features and functions, or legacy software, consider the cost of integration and testing the apps when they are moved to the cloud. Understand the interaction between these platforms with the current OS and its infrastructure. After that, determine the necessary changes to make all the systems, ensure it works well in the new environment or the cloud. Finally, make changes to the app and test. All of these steps involve money and time. Prepare a budget.
• Add Consultation Fee: It may not be possible to do everything together. You may need expert skills and some resources to execute the process of cloud migration. You can consult cloud application development services for expert advice. From mapping the approach strategically to developing cloud architecture and implementing the final migration process, consultants have the knowledge, experience, and expertise across different industries, situations, and technologies.

Popular Techniques Used to Estimate Costs for Cloud Migration

Now that we know how to calculate the costs for cloud migration, here are a few popular techniques that organizations use to pre-handedly calculate the costs.

Leveraging Cloud Migration Cost Calculators:

Online cloud migration cost calculators are available from AWS, Azure, and Google Cloud providers. These tools can help users understand expenses by focusing on precise case scenarios and geographical cloud migration pricing to generate accurate budget estimates.

AWS Pricing Calculator:

The AWS pricing estimator is a cost-effective and easy-to-use tool that provides precise rates for new and veteran users. It organizes information to help individuals identify affordable alternatives that meet specific requirements and analyze prices globally.

Microsoft Azure Cost Calculator:

It categorizes its services and makes searching for the required service easy. It also offers predefined recommended scenarios as templates that can be easily modified.

Google Cloud Cost Calculator:

This calculator is arranged by product category and may be helpful for users who have a deep understanding of their infrastructure requirements. It features a robust search algorithm and an operational cost estimate section that provides costs based on user input.

FinOps Cost Optimization:

FinOps cost optimization is critical for managing expenses during and after migration. It enables effective cloud adoption by reducing adoption costs by finding efficient services and scaling approaches to avoid waste.

Unlock Tremendous Business Growth with Leading Migration Partners for Cloud

Explore Our Services

What is The Cost of Cloud Migration?

The cost of cloud migration depends significantly on several factors, such as the scope of migration, types of benefits and risks involved in the process. Generally, cloud migration can cost anywhere from $5,000 to $500,000 or more. Here’s a breakdown based on different types of migrations:

For smaller cloud migration, costs may range from $5,000 to $50,000 which involve a limited number of systems and applications. These migrations usually take 2 to 4 months to complete and are less complex but still require well-planned for easy shifts.

Medium-scale cloud migration typically costs between $50,000 and $200,000 which involves several systems and moderate data. Such migrations usually take 3 to 6 months to finish and may need more planning as well as modification to the current system.

On the other hand, the cost of large enterprise cloud migration can range from $100,000 to $500,000 or more, depending on the compliance and operational expenses of the migration approach. These migrations would take from 6 to 12 months or longer and may require detailed consultation, data security measures and infrastructure changes for cost-effective execution.

Navigating the Challenges that Come with Cloud Migration Cost Estimation

By addressing cost estimation challenges with appropriate solutions, organizations can estimate cloud migration costs more accurately, ensuring a smoother and more cost-effective transition to the cloud.

1. Selecting the Ideal Team: Choosing the right blend of in-house resources and external expertise is critically important. Assess the need for special skills and how they will impact the migration process based on cost and infrastructure requirements.

2. Creating a Long-Term Strategy vs Lift and Shift: Cost considerations are influenced by choosing between a basic short-term approach of 'lift-and-shift' for rapid cloud migration and adopting a detailed long-term strategy. To navigate this challenge, conduct a detailed cost-benefit analysis to identify the most efficient current capital investment strategy and assess the implications of future usage.

3. Thorough Application Evaluation: Evaluating applications for cloud compatibility can be rigorous. Carry out application-specific evaluations to determine necessary changes and ensure all applications can run efficiently on the cloud while managing costs.

4. Designing an Efficient Landing Zone Architecture: Establishing an efficient landing zone architecture that enables efficient scalability and security can be hard to achieve. Investing in a landing zone that accommodates current and future demands is advised to avoid frequent modifications and additional costs.

5. Managing Dependency Constraints: In cross-system migrations of coupled systems, there is always the possibility of developing bottlenecks leading to higher costs. You may navigate this by including all potential indirect expenses, such as lost revenues and productivity, to create a realistic budget.

6. Navigating Data Transfer Processes: The amount of data to transfer and the level of sophistication can adversely impact cost. For this, you may implement efficient data migration techniques to reduce the time and costs associated with data migration.

7. Maintaining Security and Regulatory Compliance: It is important to note that sourcing security and industry-compliant products can be expensive. Assimilate security and compliance activities from the planning stage to avoid extra costs and maintain regulatory compliance.

Common Mistakes Businesses Make That Lead to Cloud Migration Over Budgeting

It is necessary to be aware of mistakes that could lead you to overestimate your cloud migration budget. Here we have gathered the more common ones.

1. Insufficient Cost Estimation and Planning: Many business organizations need to consider the additional costs of cloud migration due to a lack of appropriate assessment of current infrastructure and other expenses associated with adopting cloud environments. To address this, it is essential to comprehensively evaluate the plan and develop a realistic expenditure plan that includes ordinary and extraordinary costs such as infrastructure, data transfer, licensing, and personnel training.

2. Overlooking Data Transfer Expenses: Communication expenses may include costs for data exchange, which can increase significantly when transferring large amounts of data. Organizations often overlook the need to pay more attention to fees, leading to unforeseen costs. To mitigate this, it's crucial to evaluate the necessity of data transfer, consider data compression, assess synchronization needs, and prioritize services with lower data transfer requirements.

3. Over-allocation of Resources: Using more cloud resources than necessary is counterproductive and leads to higher costs. To prevent this, it's essential to right-size cloud resources, monitor usage rates regularly, and implement policies to scale resources as needed.

4. Neglecting Cost Optimization Strategies: When cost optimization is not performed continuously, cloud-related expenses can spiral out of control. It's essential to incorporate cost optimization within the organization by measuring and optimizing unnecessary resource usage. This can include scheduling non-production instances to turn off during non-business hours, utilizing reserved instances or saving plans, and leveraging serverless computing options. Cloud management tools can simplify these processes.

5. Underestimating Vendor Lock-In Risks: Relying solely on one cloud provider and their specific services can increase costs. To avoid vendor lock-in, it's advisable to design for portability, run applications on multiple clouds, use open-source solutions where possible, and implement containerization to mitigate the risks associated with vendor lock-in.

Leverage Our Experience to Develop Dynamic and Resilient Cloud Applications for Your Business

Know More Here

Why Continuous Cloud Cost Reviews Are Necessary Post-Migration?

Reviewing costs after cloud migration is important to manage your business's finances effectively. Here's why:

1. Maximizing Cost Efficiency: Cloud usage changes over time, so it's crucial to constantly assess your resources to identify underutilized ones, optimize configurations, and make changes that lead to cost reductions.

2. Avoiding Cost Escalation: Without monitoring, spending can increase gradually as new services and resources are added. Regular monitoring prevents excessive costs from accumulating.

3. Resource Right Sizing: Migration often leads to over-provisioning. Close cost monitoring ensures you're not paying for excess capacity.

4. Enhancing Scaling Effectiveness: Align your cloud expenses with your business's growth. Ongoing purchasing reviews enable effective scaling without overpaying during low usage and meeting demands during high usage.

5. Budget Accountability and Clarity: Regular reviews help maintain budget control and ensure correct expense categorization by department or project, promoting responsible resource usage.

Quick Tips to Cut Down Your Cloud Migration Costs

By following these tips, you can reduce cloud migration expenses and find ways to use the cloud more efficiently in the future:

1. Assess your current resources and infrastructure to identify duplicates or underutilized resources that can be repurposed or consolidated.
2. Determine the performance needs of your applications and workloads to avoid overspending on unnecessary resources.
3. Analyze plug-ins from various cloud providers and other services to find your organization's most suitable and affordable options.
4. Review your licensing agreements with software companies to identify any additional expenses associated with migrating your programs to the cloud.
5. Reserved instances can be utilized for long-running applications to benefit from discounted prices and reduced charges.
6. Develop a strategic and systematic data migration plan to minimize costs and avoid potential issues during implementation.
7. Select one that meets your needs and offers an economical model for your applications and workloads.
8. Monitor your cloud services usage and associated costs closely to identify opportunities for expense optimization.

Achieve Cost Efficiency with Right Cloud Service ProviderIt is quite evident that multiple factors are involved in determining the cost of migrating to the cloud. While it is imperative to have a detailed plan for accuracy, you should also consider 'Who' your audience is, 'What' your audience wants, 'What' your long-term goals are and 'What' do you wish to deliver. It would be wise to join hands with a prominent vendor offering bespoke solutions for cloud migration that can help you better understand your business objectives and challenges.We have developed the requisite know-how and the experience which comes from working on a diverse set of operational challenges. Are you looking to enhance your IT structure by migrating to the cloud and achieving increased scalability in a cost-efficient manner? Contact our experts today.