Cloud economics refers to the method of analyzing the costs and benefits of cloud computing as well as studying the economic principles that drive those. It helps businesses to learn about the total cost of ownership (TCO) of migrating to the cloud as well as how it will affect their ROI. This allows you to optimize your investments and work to drive the highest value from the move.
Exploring cloud economics will help you to have a better understanding of your capital and operational expenses. This is important to realize how the move to the cloud will empower your employees and support the overall productivity and efficiency of your organization. Cloud economics is much more than finding ways to cut the costs of migrating to cloud computing; it also means determining the path to meet your specific business goals through the digital platform with superior speed and agility.
Calculating the Costs of Migrating to Cloud Computing
Whether you are a large organization or a small one, cloud computing is redefining the way business is operated. According to Fingent – a cloud application development service provider, Adopting cloud computing technology will enable organizations to mitigate risks and capitalize on opportunities.
Cloud computing is often touted as a cost-effective alternative to relying on on-site IT infrastructure for various business activities. However, there are many things that affect the overall cost of cloud computing. That is why you should work out the financial benefits of moving to the cloud and weigh those well in terms of your ROI before considering the total cost of ownership of moving to the cloud alone.
Remember that no two businesses will enjoy the same economical benefits from their move to the cloud. Therefore, you need to calculate the cloud computing costs for your organization based on your individual needs. Below is a brief guide to help you calculate the potential costs of moving to the cloud.
1. Review the Existing IT Infrastructure Costs
Do a full audit of the capacity and scope of your existing IT infrastructure and review the associated costs. This will give you an idea of the cost difference for maintaining a cloud-based system. Yet again, it is not that simple as it sounds. You need to consider the TCO of your IT operations in detail, which means evaluating the overall expenses of using and maintaining the on-site IT infrastructure over time and not just taking into account what you invested for it while setting it up.
Finding the total cost of ownership for your IT infrastructure involves analyzing the direct as well as indirect costs. The direct costs refer to your investment that is reflected on the balance sheet of your company, such as the hardware and software costs. Direct costs also include the operational costs for the operation and maintenance of the servers, databases, and other components. It also covers facilities-related costs, administrative costs, internet connectivity costs, and other technology-related costs.
Indirect costs, on the other hand, refer to the loss of productivity, downtime experienced by the systems, operational inefficiencies and roadblocks, and the time spent to resolve the server or database issues. These can be a bit difficult to calculate when compared to direct costs but are very important to consider when estimating the overall IT costs.
2. Check the Expected Cloud Infrastructure Costs
Once you have a good idea of the total cost of ownership of your existing IT infrastructure, check the estimated cost of the cloud infrastructure. A thorough audit of your current on-site infrastructure will give you a detailed understanding of the networking needs, storage capacity, and database usage requirements to run your business processes appropriately. This information can be used to review the features offered in the plan by your cloud provider.
Most of the cloud service providers offer multiple pricing structures for their customers so that you can clearly understand what features are included in the package. You can also use the cloud cost calculator provided by your cloud service vendor to check what the overall costs of your cloud infrastructure would be. Some providers allow entering the details like the server type, CPU requirement, number of virtual machines, and memory, etc., to generate a quick report of what the potential costs of the cloud infrastructure would be for the long term.
3. Evaluate the Costs of Migration and Execution
You should also consider the costs of migrating the existing business and IT operations to the cloud as well as the time and effort it will take. See how the company data will be moved from the on-site database to the cloud servers and check whether it will include any networking costs. At the same time, you should also ensure that the data would remain synced throughout the migration process as you continue to use legacy systems during the move.
It is also important to assess the compatibility of legacy applications with cloud computing technology. The integration of traditional software and ERP systems that heavily rely on on-premise infrastructure to the cloud can incur additional costs. Besides, you should also be aware of how the software applications interact with the existing system and what changes you will need to make them compatible with the cloud environment.
If you do not have the expertise or resources required to execute the cloud migration tasks, then you may need the help of a consultant as well. This will be beneficial to map the right migration strategy, devise the best solution, and execute the process efficiently. An experienced cloud migration consultant will also help you to identify your organization’s strengths and weaknesses before the move. This way, you can make the most of the digital technology for improving your business productivity. However, this will come at an additional cost, which you need to take in when calculating the overall costs of cloud migration and execution.
Also, Read – Cloud Computing Trends
Compare the Costs and Make an Informed Decision
You also need to consider the overall post-migration costs such as monthly cloud infrastructure costs as well as the direct and indirect costs to run and maintain the system. This may include the integration and testing of apps, administration and workforce, security and compliance, and more. When you have that number, compare the final costs of adopting cloud computing against what you are spending on the current on-site infrastructure.
Note that cost-savings are just one aspect of moving to the cloud. It also offers a lot of intangible advantages that cannot be reflected in the company’s balance sheet. This includes making your organization more agile to test and deploy products much quickly as well as react to the changing market scenarios proactively. Unmatched scalability and flexibility are also notable benefits of moving to the cloud, while reduced downtime and higher security are the others on the list. Therefore, you need to analyze all these aspects of cloud migration too aside from the cost benefits when making the decision.