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How the Total Cost of Ownership Approach Can Help Your Cloud Migration

Updated: May 3


Cloud cost continues to remain the top concern for industry leaders who are considering migrating their servers to the cloud. However, the question that arises is how to accurately compare the costs associated with cloud migration versus on-premise solutions. In this article, we will delve deeper into this topic and explore various aspects related to it.

The three largest cloud service providers, namely AWS, Azure, and Google Cloud, offer a Total Cost of Ownership (TCO) approach as an effective means of measuring and comparing cloud migration costs versus on-premise solutions. This approach provides a comprehensive assessment of all the expenses associated with cloud migration and on-premise solutions, allowing organizations to make informed decisions based on their specific requirements.




What is Total Cost Ownership (TCO)?


Calculating the lifetime costs associated with hosting, operating, integrating, securing, and managing workloads in the cloud is known as cloud TCO. Fees for the underlying infrastructure, such as computing, data transit, and storage, are included. It also covers the price of maintaining cloud services, such as data analytics and security and management tools.


Even if you are familiar with total cost of ownership (TCO) models, it might be difficult to ensure an accurate comparison while using the cloud. Organizations are adopting an all-encompassing approach that takes into account factors including talent, competency, speed to market, and cost flexibility. Some comparisons take into account statistics related to the number of users or programs, but the all-encompassing peripheral perspective is as important.




The Cost Implications of TCO


You must compare your present costs to the costs associated with the cloud in order to calculate your TCO accurately.





A Physical Setting


Consider server characteristics including hardware type, processing power, storage space, and server utilization when comparing hardware expenses. Virtualization is a crucial component of cloud provisioning and a wonderful first step in making environments more easily accessible to users. You'll find using the cloud easier if you're already highly virtualized. However, you can also wish to use automation or containerization to improve virtualization. By giving reusable starting places, images can simplify the installation process. However, your startup cost can be higher if those patterns don't exist.


Think about possible container uses and whether you can balance cost and density. Also take into account the effects on the network, such as latency and network speed. You could require additional infrastructure to support your apps, depending on where the cloud is located. Establish the support levels you require and those that the cloud service provider is able to give. Cloud computing environments provide a wide range of options, from simple environment access to fully managed services with patches and application-level support. When calculating the cost impact, it's crucial to specify the roles and responsibilities for the services you require.


Application Levels


There are several cloud providers that provide licenses for popular applications, or depending on the virtualized settings, you might have access to alternative licensing options. The secret is to accurately capture the software's intended purpose and model the necessary licensing. Installation and deployment can be significantly facilitated by a catalog of images or containers. This strategy demands more work and money up front.


Examine each application's architecture to find any potential cloud migration problems. Moving an application to another device is sometimes as simple as lifting it. In other circumstances, a program may not function properly because of its architecture and may require refactoring, rewriting, or replacement. Establish suitable patterns for capturing costs for each type of disposition.


Process


Review service management to make sure you get the protection and assistance you require and that you can keep track of the relevant expenses. Self-serve adoption and deployment in the cloud are heavily influenced by this, so be sure to take this into account when determining how to use the cloud.


A successful cloud adoption path requires automation. You must assess your present automation maturity, whether for virtualization or scripting, and determine any potential expansion areas, taking into account any associated expenses.


Concerns about security and data privacy increase when you use the cloud. The cloud frequently offers coverage, but it's crucial to evaluate what is offered, decide whether it is sufficient, and then calculate the costs of adding any further coverage.


People


You must take talent development and enterprise enablement into consideration, just as you would with any new technology that you introduce to your company. The level of enablement varies depending on the position, but you must have the right level of enablement to offer a comprehensive TCO view and guarantee successful adoption. Enablement can also be discussed in relation to new hires or reskilling.


Identify the precise duties and obligations connected to the new environment. Cloud computing offers a range of options, from a hardware-only model to a fully managed service. It's essential to record everything your team does in order to calculate the cost appropriately.


It might be challenging to assess the effect on the culture of your organization. The cloud tends to favor more agile operations, therefore your firm may have a learning curve or culture shift. It is advisable to account for any cultural shifts when capturing TCO. A cloud-focused organizational update can be something you think about and carry out. Additionally, you can combine cloud functions and roles to create a structure that is matched with the cloud.


Case Study


Metinvest Migrating to Azure



In order to change its IT infrastructure and take advantage of Microsoft Azure, Metinvest, a well-known international steel manufacturer and mining corporation with headquarters in Ukraine, formed a strategic partnership with Microsoft and the local partner Infopulse. Metinvest moved its 680 servers and 240 TB of data from two local datacenters to the Azure cloud platform to meet the demand for scalability and improved capabilities. In less than a year, the project, which involved re-platforming programs for best cloud utilization, was finished, with expected savings of USD 3 million over the following ten years.


Metinvest successfully made the switch to Azure and implemented cutting-edge technologies like Azure Site Recovery and Azure Backup with the aid of the Infopulse, FastTrack for Azure, and Premier Support teams. Additionally, the business introduced Windows Virtual Desktop, giving 2,000 users immediate access to vital internal programs. Metinvest achieved a highly scalable and resilient IT infrastructure thanks to their use of Azure, enabling flexible app and workload scalability in response to demand. With Azure Security Center and Azure Bastion, the firm also gave security first priority, offering strong threat protection and secure service access.


Future projects by Metinvest include the adoption of Azure Sentinel and Azure Synapse Analytics for sophisticated data analytics. This will be part of the company's ongoing commitment to the cloud. Metinvest increases its long-term competitiveness and solidifies its position as a pioneer in the mining and steel production industries by collaborating with Microsoft and utilizing Azure's capabilities.


"We expect to decrease the total cost of ownership of our infra-structure by USD3 million over the next 10 years." - Sergiy Detyuk: Chief Information Technology Metinvest Holding, CEO

How Azure Calculate the Total Cost Ownership


Azure offers customers and prospects a comprehensive Total Cost of Ownership (TCO) assessment, enabling them to compare the costs of on-premises infrastructure with cloud-based solutions over a three-year period. The TCO estimation takes into account various components involved in calculating the total cost of cloud migration. Remarkably, based on Azure's estimates, companies can potentially achieve cost savings of up to 78% within the span of three years by leveraging the power of Azure's cloud platform.



We can estimate the TCO for Azure cloud based on the chosen configuration and Azure region. The TCO assessment will take into account factors such as compute, storage, networking, and other related costs over a specified period (e.g., three years). The Azure TCO calculator can provide a detailed breakdown of the estimated costs, including compute resources, storage usage, data transfer, and any additional services or features required.



By leveraging Azure's TCO assessment tools and comparing the estimated costs with on-premises infrastructure, organizations can make informed decisions regarding their cloud migration strategy and evaluate the potential cost savings and benefits of adopting Azure for their specific requirements.


Best Practices for TCO Analysis in Cloud Migration


To maximize the effectiveness of Total Cost of Ownership (TCO) analysis in cloud migration, it is essential to follow best practices. Here are two key practices to consider:


A. Collaborating with finance and IT teams to gather accurate data


Collaboration between finance and IT teams is crucial for conducting a comprehensive TCO analysis. By working together, these teams can gather accurate financial data and technical insights. Finance teams provide valuable cost data, while IT teams contribute their knowledge of infrastructure requirements and operational considerations. This collaboration ensures that all relevant costs, including infrastructure, licensing, support, and training, are captured accurately, enabling a more precise TCO assessment.


TCO estimators can be used to create a baseline. For estimating expenses, many analysts and companies offer calculators. These calculators can be a wonderful place to start, but you should also keep in mind the costs you took into account while thinking about the application, process, personnel, and physical environment.


AWS Pricing Calculator : https://calculator.aws/#/



B. Incorporating future growth projections and evolving business needs


Successful TCO analysis should go beyond the current state and consider future growth projections and evolving business needs. Take into account potential changes in user demand, expanding workloads, or emerging technologies. By incorporating these projections, you can make informed decisions that align with long-term business objectives and minimize potential migration hurdles down the line. It is crucial to consider scalability and flexibility to ensure that your chosen cloud solution can accommodate future growth without incurring excessive costs.


C. Continuously monitoring and reassessing TCO throughout the migration process

TCO analysis is not a one-time activity; it requires continuous monitoring and reassessment throughout the cloud migration process. Regularly review and update cost estimates as the migration progresses and new insights emerge. Monitor the actual costs incurred during the migration and compare them to the projected TCO to identify any variances and adjust the strategy accordingly. By actively monitoring TCO, you can identify cost-saving opportunities, address unexpected expenses promptly, and optimize the overall cloud migration journey.


By implementing these best practices, organizations can ensure that their TCO analysis remains accurate, future-oriented, and adaptive to changes, ultimately leading to a more cost-effective and successful cloud migration experience.


Bottom Lines


In conclusion, when considering cloud migration, accurately comparing costs is crucial. The Total Cost of Ownership (TCO) approach offered by major cloud service providers like AWS, Azure, and Google Cloud provides a comprehensive assessment of expenses associated with cloud migration and on-premise solutions. Evaluating factors such as hardware, virtualization, applications, processes, personnel, and physical environment helps calculate TCO accurately. By using TCO estimators and considering the unique needs of your organization, you can determine the cost implications and potential savings of adopting the cloud. Leveraging Azure's TCO assessment tools, such as the Azure TCO calculator, allows for informed decision-making and the realization of cost savings and benefits offered by cloud platform.


Unlock the true potential of your business by embracing the cloud. Our experts can guide you through a seamless migration process, minimizing your Total Cost of Ownership and maximizing efficiency. Take the first step towards a future-proof IT infrastructure by scheduling a consultation with our cloud migration specialists today.








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