Right, almost nothing. After all, migration to the cloud should not only be efficient, but also stand out as the more cost-effective alternative to the data centre in the long term.
Our cloud and cost expert Simon Baumgärtner, who has carried out numerous cost considerations and analyses in relation to the public cloud in recent years, chats inside his box and reveals important tips.
When should companies start thinking about cloud costs?
Ideally, which does not happen in most companies, the cloud evaluation begins about two years before the actual migration. During the cloud evaluation, the current status is documented in detail. The company needs to know exactly what resources, hardware, software, licences, processes, infrastructure and, of course, current and planned IT costs we have.
Once this inventory is complete, the process moves into the cloud assessment phase, where the existing IT is compared with the potential IT in the cloud. The objective here is to identify the various benefits and values of each environment, making the subsequent decision for or against the cloud more straightforward.
A critical component of the cloud assessment is the analysis of Total Cost of Ownership (TCO). This involves comparing the current (or planned future) IT costs with the potential costs of a cloud environment. The cost factor remains one of the main decision drivers for businesses.
In simple terms, the outcome of the cloud assessment serves as a decision-making basis. If the assessment leans towards the cloud, we proceed with planning, architectural designs, and implementation.
Two years might sound like a long time, but it goes by quickly. However, companies with less time to spare shouldn't rule out a cloud evaluation. In such cases, it's advisable to engage an experienced partner early on, who can streamline decision-making and expedite the process due to their expertise.
Public cloud or on-premise - what is recommended for whom in terms of costs?
When it comes to the possibilities of cloud and on-premise environments, the industry cannot be divided into two camps in which it is possible or impossible. A migration to the cloud is possible for every company, but should always be checked in advance.
In most cases that I have been able to accompany in the cloud world over the past three years, the cloud turns out to be a cheaper alternative for the IT environment. However, it is also very important to me personally to clearly address the more expensive cloud infrastructure for the company in the remaining cases. IT is always associated with costs and no company will be happy or successful in the long term if it commits investments that it does not need.
What should companies definitely consider when considering the costs of the cloud?
I believe the best advice I can offer at this point is to consider ALL costs. Resources like existing hardware can be quickly accounted for, but factors such as required space, power supply, or cooling must not be overlooked. Other examples include licences and employees - and not just as resources, but also their knowledge levels and training needs.
Another crucial point in cost consideration is the scope. If one only focuses on the migration itself and its costs, the long-term calculation will be inaccurate. It's important to always include all the "lifecycle phases" of a cloud environment. This includes not only the migration but also the ongoing operation. Will this be managed internally by your own employees or outsourced to a partner? If it involves internal resources, what training and additional positions are necessary to ensure smooth operation?
I know you might be expecting this answer [laughs], but I consistently recommend bringing in an experienced partner as early as possible. Ideally, such a partner has already conducted numerous cost evaluations and knows precisely which aspects to prioritise.
Which analysis method can you recommend for cost analysis?
At the outset, I always recommend starting with a "Cloud Readiness Assessment," which involves conducting a company-wide maturity check regarding the Public Cloud. This assessment precisely captures the status of each area and identifies areas needing immediate attention.
Various tools such as Cloudamize
or the AWS Migration Evaluator can be utilised to gather this current state information. This step is crucial to obtain a robust overview. During this phase, close attention is paid to system utilisation and environment rightsizing, as hidden cost-saving potentials often reside in on-premise environments.
A tip at this stage is to consider evaluating cost models that offer the possibility of reserving different instances for an extended period. Longer runtimes, up to 3 years in this context, can yield approximately 40% of cost-saving potentials, particularly in the compute domain.
When analysing the results, it's crucial to present them in a manner that is comprehensible throughout the organisation, enabling the management to approve or reject the cloud strategy based on these data.
What is your expert tip when it comes to cloud costs for companies?
I have two expert tips to share. The first one is not to solely rely on online calculators that are fed with a fraction of the relevant data. The results from such tools are not reliable and can lead to costly business decisions in the long run.
My second tip, as hinted earlier, is to always involve an expert who possesses both the expertise in cloud cost analysis and access to the chosen cloud provider. For instance, at our company, we have been collaborating with Amazon Web Services for years, which enables us to apply for individual funding for each client. This funding often provides a financial boost in the four to five-digit range for many cases.