The world has changed immensely since on-premises infrastructure was considered the best option for company applications. Today, most companies have begun shifting toward off-premises options, such as cloud and co-location. But how do they determine which is best – should companies make cost a primary deciding factor when choosing to migrate? Is it fair to make such a cost comparison between on-premises and cloud systems? Before any company switches to cloud computing technology, they need to understand the pros and cons of both options for specific workloads. This is because no clear winner exists between on-premises and cloud computing solutions, even from a cost perspective.

All costs considered

With on-premises, the company uses in-house dedicated servers, which must be obtained with considerable upfront investment, including buying servers, licensing software, and hiring a maintenance team. In-house infrastructure is not as flexible when it comes to scaling resources and not using the full potential of the setup results in undesirable operating costs.

On the other hand, cloud computing has little to no upfront costs. The infrastructure belongs to the provider, and the client pays for usage monthly or annually, depending on the service or units consumed and time used. There is no need to spend money hiring a technical team because the service provider is usually responsible for maintenance and uptime. In this respect, cloud computing has the upper hand when it comes to pricing. It has a pay-as-you-go model with no upfront investment, and it is easier to predict costs over time. On the other hand, in-house hosting is cost-effective when an organization already has servers and a dedicated IT team. However, the price is not the be-all-and-end-all of decision making, but only one of the many factors that need to be considered before any public cloud migration, such as:

– Current infrastructure utilization

– Service accessibility in the region

– Application workload analysis

– Data protection

– Data security and compliance.

Another crucial aspect that organizations should consider is the environmental impact of their choices. With a growing focus on sustainability, cloud providers often offer energy-efficient solutions. On the other hand, on-premises systems may lead to higher energy consumption per workload due to inefficiencies and limited optimization. Therefore, companies that prioritize sustainability can view cloud adoption as a step towards reducing their carbon footprint.

Even with simplified assumptions, calculating hard-dollar cost comparisons between cloud and on-premises infrastructure is complex. Price can vary wildly depending on the specifics of the system being deployed. However, for midmarket and enterprise businesses, cloud-based solutions represent a potential cost savings of 30% over five years. This potential for significant cost savings can instill a sense of optimism and hope for companies considering a cloud migration. But if cost is not the ultimate influencing factor, what else should companies be looking at? The advantages of the public cloud include faster time to implementation, net present value, flexibility, reliability, security, and scalability.

Risk, value, and change management

Migration costs must be weighed against the value gained, and change management is critical to unlocking a successful transformation. Moving to the cloud will mean different things depending on the company’s journey and business needs, and as such, the cost of migration will correlate. In such moves, the human tendency to be apprehensive about change is often a more significant risk to a cloud migration than any technological challenge. A lack of end-user engagement, communications, and training during a cloud transformation adds to these worries. Accordingly, organizations must utilize change management to ensure that the human side of a digital transformation goes as smoothly as the technological side.

It is also crucial to assess the implications of business continuity during migration. Companies must develop a robust plan to avoid disruptions to critical business operations. This includes scheduling migrations during low-demand periods, ensuring redundant systems are in place, and conducting thorough testing before full-scale deployment. Failing to address these considerations could lead to costly downtime and a loss of customer trust, overshadowing the benefits of migration.

Choosing the migration strategy Cloud migration is moving some or all the company’s digital operations to the cloud. Three main types of cloud migration can be performed – on-premises to cloud, cloud to cloud, or cloud to on-premises. We should identify infrastructure and application workload by analyzing the complete IT system and map these with appropriate cloud migration strategies. Such assessment will determine which strategy to use and which part(s) should be moved to the cloud. Cloud migration strategies were first defined in the Gartner “5 Rs” model in 2011 as:

Lift and shift—moving applications to the cloud as-is.

Refactor—tweaking applications to better support the cloud environment.

Re-platform—shifting without significant changes to leverage cloud benefits.

Rebuild—rewrite the application from scratch.

Replace—retire the application and replace it with a new cloud-native application.

Beware the hidden costs.

The cost of migration depends on what is moved to the cloud and what remains on-premises. However, companies must be aware of the hidden costs that lurk in cloud migrations, as the public cloud is a consumption-based service model that can sometimes be difficult to measure. These may include:

Data transfer costs – Moving data from the cloud or enabling customers to pull down data is not free with any of the major cloud providers.

Cloud utilization costs – Public cloud providers charge a fee whenever a company attempts to access its data. While the fees are tiny—sometimes fractions of cents per hour, cloud providers are banking on high volume.

Business process reengineering costs – While organizations expect a cloud migration to improve efficiency and functionality across the board, this requires an investment in business process reengineering to fill the gaps in understanding, links, security, and performance issues that cloud migration raises.

There must be a complete understanding and analysis of IT systems before moving on to the public cloud. Most importantly, after migration, public cloud services must be carefully managed to achieve specific reliability and availability goals, including network availability, disaster recovery planning, testing application and database stability, and otherwise planning for redundant infrastructure. This emphasis on careful consumption management is intended to make the audience feel cautious and vigilant, as it is crucial to avoid the hidden costs of the public cloud that can cause organizations to regret their choice to migrate.

Sarthak Rohal – VP, IT Services