In practical terms, when using a public cloud from major hyperscale providers, you are essentially paying for three things:
- the chosen performance of your cloud environment,
- the required storage capacity, and
- the network usage.
These three factors, adapted in type and scope to your individual cloud environment, are billed monthly. The hyperscalers Amazon Web Services, Google Cloud and Microsoft Azure follow a "pay-per-use" approach, whereby you are only charged for what you have used within the month.
Traditional IT costs vs. cloud costs
The simplicity of cloud costs becomes particularly clear when they are compared with conventional IT costs. In this example, we refer to the operation of an in-house data centre.
In addition to the hardware and server equipment of the data centre, the operating costs due to electricity, cooling, water and insurance are of particular importance. We also include the personnel resources for administration and management of the environment in the operating costs. Their ongoing training should also not be ignored when considering conventional IT costs. The hardware-related investments are quickly joined by the appropriate software products, including their licences.
This package of costs involving hardware, software, and management is also referred to as direct costs. However, beyond these, it's necessary to incorporate hidden costs into the calculation as well.
Hidden costs might include backup and recovery systems, which require their own independent setup, management, and maintenance. Other hidden aspects could encompass audits from partner companies or compliance with security policies.
The cloud cost comparison: Does the public cloud pay off for you?
To accurately determine your cloud costs and, more importantly, to compare them with your current IT expenses, we recommend conducting a Total Cost of Ownership (TCO) analysis.
This involves measuring your current IT environment, both through software-based and manual methods, to calculate your ongoing IT expenses. Subsequently, the precise operational costs in the public cloud can be calculated based on the measured environment, including all requirements and specifications.
The result of your TCO analysis serves as a foundation for decision-making. It provides insights into the potential cloud costs you would incur and also identifies the business cases that could be realised in the cloud.
Cloud costs: Here are your next steps
For cloud costs to arise in the first place, a migration of your applications, workloads, partial, or entire IT environment to the public cloud is necessary. Especially when it comes to the topic of costs, it is crucial to emphasise that these costs are not solely related to operations. Instead, in a comprehensive cost assessment, you should consider the entire cloud journey - in other words, the sum of your full experience and activities in the cloud.
To provide you with insights into this holistic cost assessment, we offer resources such as our whitepaper "Cloud & Costs." This whitepaper offers a deeper understanding of various cost-related aspects and can be easily downloaded with just two clicks, free of charge.
You can access the "Cloud & Costs" whitepaper here: