The economics of moving to the cloud

Updated on November 05,2022

For your company to ensure its viability and continuity throughout this age of technological revolutions, the 'telepresence of services' has to be at its core. To mean the services your company offers have to be available on demand, wherever the customers are, and in its best form, of course.

The world is ceasing to be a summation of geographically bounded regions, and soon it will be one.

Latest trends in businesses managements, like telecommuting, will soon substitute much of the on-premise employees. All these revolutions are a result of cloud computing. 

In the race to not be left out, many companies today are expanding into cloud computing as a way to reduce the cost and complexity of delivering traditional IT services. But determining the best mix of public and private cloud services and data centre services is complicated.

You can’t simply add up specific costs and make a fast determination of what’s the best approach for your organization. Instead, you have to look at your business requirements for performance, availability, security, and the workloads you need to support.

Having successfully studied the introduction to the cloud, I have prepared this simple-to-digest guide to help prepare you for moving to the cloud.

The economic strategy

Typically, your organization has many different types of workloads to manage in its own local premises (data centre, for that matter) that may be better suited for a cloud environment, which may be due to compelling reasons that had not been brought to your understanding. So, to optimize your economic benefit from the cloud, you must first have a good understanding of your workload requirements.

Looking at the direct and indirect costs of moving to the cloud can be a starting point.

Consider the benefits you stand to gain if you move to the cloud. In the following sections, we will look at both of these.

What do you stand to gain?

Generally, moving to the cloud is a good step for every organization. It has some cool benefits that are of profound importance to a business. While the business and IT divisions come to the cloud for different reasons and with different goals, here is what, for sure, they will gain.

Lasting customer relationships: giving it a keen look, implementing an online collaboration for your customers and partners can lead to business innovation and transformation that far outweighs the costs associated with the implementation.

IT without traditional boundaries and restrictions:

Whereas traditional IT can trap technology and information in silos, cloud services simplify access and help connect people across the enterprise (and beyond).

Improved speed and agility: Cloud services help you increase the delivery of IT computing resources. IT is necessary whether your goal is to be first to market with a new product or simply provide the best, most responsive customer service, speedy yet flexible.

Transformation of the economics of IT: Self-service and deployment help speed the delivery of new offerings and services to your customers.

Evaluating costs

When looking at the right balance of public, private, and local data centre services, you have to look at the overall costs of every environment.

Start by understanding what it costs you to operate your own data centre by looking at both direct and indirect costs related to the application or type of workload you want to move to the cloud.

Some hard costs are involved with cloud services, but understanding your business needs and growth strategies helps you put the costs into perspective. Having the ability to pay on an as-needed basis for servers, storage, and other services, for example, can give your company a needed boost for implementing innovative solutions with far less economic risk than buying the required infrastructure upfront.

Below is a hardly comprehensive list of possible costs:

Support personnel costs: What are your costs for staff support for day-to-day operations and management of this application? Will some of these costs be transferred to the cloud provider? Your own personnel will still be required to manage and monitor your cloud services in concert with your data centre services.

Server costs: look at the total annual costs of the ownership of your server and all other hardware components. This consists of the cost of hardware support plus some extra costs for purchasing the hardware. Additionally, a particular server may be used to support several different workloads. The more disparate workloads a server manages, the higher the support costs.

Storage costs: What are the management and support costs for the storage hardware required for the data associated with this application? Storage costs may be very high for certain types of applications, such as e-mail or complex analytics. Having informed knowledge about this may save you a lot.

Network costs:  consider this, when a web application you host internally, such as e-mail or collaboration, is moved to the cloud, it may reduce strain on your network. However, it can substantially increase bandwidth requirements. So judge keenly.

Disaster recovery costs: In theory, the cloud service has its own disaster recovery capabilities, so there may be consequential savings on disaster recovery. However, you need to clearly understand your cloud provider’s disaster recovery capability. For example, does the cloud service provider have mirrored sites in case of a power outage at one data centre location? IT management must determine the level of support the cloud provider offers. This can be an added cost from the provider, or you may seek a secondary vendor to handle disaster recovery and procedures.

Data centre infrastructure costs: This consists of a package of costs, including electricity, floor space, cooling, and building maintenance. All these are an integral part of managing any data centre. Because of the large investment in data centres, moving workloads to a public cloud may not be financially viable if you only utilise as little as 40 per cent of the data centre’s computing power. (Of course, you can deploy a private cloud to take advantage of the underutilized space and the advantages of the cloud.)

Software maintenance costs: What’s the annual maintenance cost for the software you may move to a cloud-based service? The answer can be complicated if the software license is part of a bundle or if the application is integrated with other applications. In addition, there’s the cost of purchasing the software. Is the organization taking advantage of a “pay-as-you-go” licensing model that allows users to pay only for what’s used?


Below I will give you a few examples of situations that may spark a move to the cloud platforms. We will consider Infrastructure as a service (IaaS) as likely to deliver an economic benefit if you need increased capacity. This may take several forms:

✓ Say your organization is preparing for a new but short-term initiative, and you temporarily need extra CPU capacity and storage. This may be a good match for an unpredictable requirement that isn’t economical.

✓ Organizations may continue to need additional computing or storage resources over time and can use a private IaaS to make those resources available on demand for various projects. For example, additional public or private resources may be required as hardware reaches end-of-service life.

✓ Some organizations are using IaaS for cloud bursting when there are unexpected or planned high-load periods. The flexibility of using IaaS means that the company doesn’t have to overinvest in hardware. These companies must be able to adapt to higher loads to protect themselves. 

Another consideration to make, companies find that PaaS can offer value during development and deployment instead of having to purchase many different tools. By providing the underlying software infrastructure, PaaS can reduce organizational costs. PaaS reduces many of the costs involved with the traditional application development and deployment model, including server and storage overhead, operating systems, workload and performance management software, network bandwidth, software maintenance, and support personnel

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