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Calculate cloud costs correctly

The transition to the cloud is closely tied to the question of the costs involved in a cloud migration. First things first: Cloud costs cannot be calculated universally, but always refer individually to your company, your requirements, and your objectives. In this article we give you an overview of what needs to be considered in relation to cloud costs, which calculation method has proven itself and whether the cloud is actually the cost-effective alternative to your on-premise environment.

The hidden IT cost-monster

When you think of new digital solutions for your IT infrastructure, you usually have significant costs in mind: new and modern is always expensive! But is this modern cloud technology really more expensive than your traditional IT environment? If you want to compare cloud costs with those of traditional IT operations, you have to consider some factors that are not obvious at first glance.

In comparison, the cloud has only three major cost points that need to be considered - because you only pay for what you actually use. Due to the high flexibility and scalability of the cloud, provisioning can be tailored to the specific needs of the company.

Cost points in conventional IT operations:

  • Electricity and cooling are significant cost drivers that many customers do not take into account
  • In addition, the operation of the data centre building with uninterruptible power supply (UPS) and air conditioning units
  • Licences for e.g. VMware and Microsoft, just to name the most common or largest cost factors
  • Number of employees and ongoing qualifications are other main points (the cloud, on the other hand, greatly reduces IT operations)
  • Expenses for system redundancy (backup and disaster recovery)
  • Establishment and management of a consistent security level

Cost points in the public cloud

In practice, when operating in the cloud, you're essentially paying for three things:

  • Performance
  • Storage capacity
  • Network

Initially, there are also possible training courses for your users and, of course, the migration of data and applications. After a successful initial migration, many processes will now run much faster and more cost-effectively, since the computing resources can be used much more effectively thanks to their optimal scalability and agility.

What do you want in terms of your cloud costs?

The more precisely you define your needs and requirements, the more precisely we can put together your individual cloud package with the corresponding cloud costs. Potential savings are achieved in 85% of cases.

The first step is to look at the performance: Which services should be available for which users? Based on these services, a first rough cost analysis can be made, which will last forever. The high flexibility of the cloud also makes it possible to make spontaneous changes to the booked packages, but a forward-looking reservation of resources pays off significantly more, because greater flexibility comes at a price.

If, for example, computing power is required on demand, it can be expensive for users to reserve the appropriate instances in advance. The same applies to memory and the use of VPN or encryption.

To put it briefly, the more precisely you know and name your specific requirements, the more you can plan and save effectively in the public cloud.

Beware of the motivation trap!

IT professionals in particular are fascinated by the possibilities of the cloud. This is where the cloud becomes a true seduction artist. But beware! It is not uncommon for costs to arise during development or in the ongoing project that can be avoided relatively easily.

With the cloud, it's very easy to self-service to activate virtually unlimited resources. However, there is also a danger of quickly losing track and leaving too many active resources unused. This leads to significant costs!

Therefore: Responsibilities must be clearly defined and resources must be assigned to specific individuals or teams. You can easily scale up your booked resources at any time. So there's no harm in starting small.

Another tip is the proper induction of employees. It is worth keeping an eye on this process and, if necessary, accelerating your employees with well-thought-out training courses and advice. Every technology is only as good as what the users make of it.

What are your current costs?

Many companies ask themselves this question when they think about cloud costs. The TCO (total cost of ownership) analysis provides a holistic view of all your costs. In this case for your IT or cloud infrastructure.

However, the TCO analysis not only takes into account the direct costs, such as initial investments, but also all ongoing and indirect applications. Based on these values, it offers important support and a basis on which comparisons can be made with future expenses and cost models.

So far there is no uniform model for TCO analyses. Therefore, we have developed the Delta Calc analysis with our public cloud experts to take into account the relevant costs of your investment decision. This analysis covers all cloud costs associated with this undertaking; everything else is excluded. This gives you a meaningful overview as a basis for your decision-making.

Special TCO analysis

What makes our TCO analysis unique is that it starts exactly where you are in the pre-project stage. So, if you're contemplating moving only a single application to the cloud or utilising a specific cloud service (like virtual workspaces), there's no need to calculate how much the data centre's air conditioning needs to be scaled down.

“Normal” TCO analyses, which are primarily created using calculators, often have major weaknesses when it comes to creating realistic cost situations — especially if a company wants to keep its data centre. We also look at the concrete market prices of licences, the terms of maintenance contracts or current discounts from the manufacturers. Because nobody pays the manufacturer prices (RRP) anyway.

The TCO Analysis sequence:

  1. Definition of targets
  2. Detailed documentation of current environment
  3. Discussion of the projected changes
  4. Creation of an AWS environment
  5. Evaluation of future costs in the data centre (DC)
  6. Comparison of the AWS cloud vs. an on-premise environment

Don't be afraid of changes!

The perennial issue of costs is, of course, a recurring theme in any investment decision. However, it shouldn't put you off considering cloud technology. If you have a good overview of your requirements and the needs of your company, you will find it easy to put together a suitable package for your cloud solution.

If you have any doubts or simply to consolidate your planning, get a precise overview of your current IT costs, for example with a TCO analysis, and get an overview of the advantages of a cloud solution for yourself.

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