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How much will your cloud cost?

Savings are one of the primary reasons to move to the cloud. However many a time, organizations are confronted with bills that are larger than earlier on-premises expenses. Let’s understand why this happens and how you can save yourself the hand wringing by calculating your migration costs before you transition to the cloud.

Computing the cost of cloud migration is, unfortunately, not straightforward; in addition to comparing differences between on-premises and cloud prices, you have to consider a variety of other costs, such as data storage, refactoring, security, etc. It is easy to overlook expenses like employing new staff or deploying new services. Here’s a checklist of costs you must factor in to ensure your cloud migration is financially beneficial.

Capex (On-premises) vs Opex (Cloud Services)

Calculate your current on-premises costs

This is the very first step to undertake before you begin to move to the cloud. Your calculations should include the cost of existing hardware and software, and compare it to cloud-based options. This is not as easy as it looks, as on-premises infrastructure involves Capex expenses while cloud resources don’t, as they follow an Opex model.  IaaS virtual hardware and SaaS applications only incur costs at actual. To overcome this you have to convert your on-premises Capex costs to Opex. One way is to divide your resources cost by the time you usually spend using them. while this isn’t an exact conversion—as it doesn’t account for costs that might augment the server’s life, like additional memory, or new hard disks—it nevertheless gives you a broad baseline to compare with equivalent costs in the cloud.

There are also some resources that you don’t need to pay for, like network switches, UPS units, network-attached storage, etc. You also won’t attract expenses, like electricity, physical site security, post migration.


It is common to see organizations simply transfer their applications and data (housed in on-premises storage) to public cloud (compute and storage services)

Here no refactoring costs need to be calculated, making migration costs simple to compute. However, this method—known as life-and-shift—may not be in your best interests and undermines some of the basic reasons you chose to move to the cloud. For instance, you may have large monolithic applications that can benefit from migration to containers and serverless computing.

Of course, modifications such as converting a monolithic application to microservices is a cost factor as it requires a set of cloud services, many of which need the expertise to administer effectively.

Cloud costs

Once you have calculated your on-premises IT cost, you need to calculate the cost of your planned cloud and compare both.

Calculating cloud costs involves many variables, there are different vendors and their pricing schedules to consider. Many also depend on regions and how many resources you consume. High volumes of cloud storage cost less than just a few gigabytes. The cost of reserving certain cloud services in advance is also less than simply consuming them as you go along. To make this task simpler, you can use calculator tools designed for this express purpose. AWS offers its AWS pricing calculator. Azure and Google Cloud too provide their own pricing calculators. Remember these calculators are native to their specific clouds. If you prefer a third-party option, try Apptio Cloudability or CloudCheckr; although these are more cost-optimization tools and are better at identifying the most economic option for your needs, they can’t predict costs as accurately as the cloud vendors’ own calculators.

Cost of auxiliary services

There is an array of add-on services that you’ll probably leverage once you move to the cloud, and these need to be calculated too.

Auxiliary services include services like CDNs (Content Delivery Network) add-on services to enhance cloud workload security, and improve performance. Obviously, the more of these services you use the higher your cloud bill.

Hidden costs

There are various costs that can be easy to overlook, but must be anticipated. Don’t overlook costs like the ones below:

Cost of data migrations:  If you have very large volume/s of data to move, you may end up using services like AWS Snowmobile, which will add up your costs.

Skills: If your existing IT team doesn’t have the requisite skills you will need to engage the services of a professional IT services business, which will add to your total cost.

Consultants: You may decide to hire a consulting company that specializes in handling cloud migrations, this is, for many, the smart choice, but it does augment cost.

Backup: don’t forget to calculate the cost of backup storage in the cloud—this cloud be on-premises or another cloud or a different region

Cloud management

A lot of your cloud management and administration can be automated. Tools like AWS Step Functions and Auto Scaling can automate workflows, or you may want to use Infrastructure as Code (IaC) to automate provisioning and deployment. Setting up these tools will add to your costs, as well.

Orchestration costs

Depending on the type and scale of your workloads, you may want to host them in containers, which calls for an orchestration platform, like Kubernetes. If you aren’t using Kubernetes currently, you will have to first set it up; also the cost of Kubernetes on-premises and in the cloud is different. Or you may choose to avail of Managed Kubernetes services, whatever you decide you should study the costs closely.

Infrastructure write-off

Unless you plan to go hybrid, there will be infrastructure in your on-premises environment that you just won’t need in the cloud. This will have to be decommissioned, and writing off infrastructures that have a useful lifespan remaining is an expense too. The exact cost of this write-off depends on how much life the hardware has and if you can repurpose it or sell all or some of it off.

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