Are you really going to save money by moving to the cloud?

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The number one reason most people move to the cloud is to save money. But, will you really?

Sure you’re guaranteed to reduce your Capital Expenditure (CAPEX). But, if you’re not careful all you’ll end up doing is replacing your CAPEX expenses with cloud service Operating Expense (OPEX).

So, before you sign the dotted line for a brand spanking new cloud service, you should take a long, hard look at your existing IT costs. When it’s all said and done you may not really be reducing your outgo. 

First, look at what’s really going on in your existing data center. A recent study by Stanford University Consulting Professor Dr. Jonathan Koomey found 80 percent  of in-house data centers have far more server capacity than their owners need. 

Indeed, Koomey states 20-30% of servers in typical enterprise data centers are using electricity but doing nothing useful. These are comatose servers. The net result is you’re overpaying for server capacity you never use. So, if all you do in your cloud migration is map over your existing server instances to the cloud, two-thirds of the time you’ll actually see a cost increase.

If, however, you first optimize how you use your existing in-house servers — by eliminating comatose servers, consolidating low-use servers, and right-sizing server instances — you can easily save money. This, Koomey points out, is the low-hanging fruit. 

Also, by optimizing your servers first, you can save money both in the short-term before you make a cloud move and in the long-run when you’re on a cloud. After all, once you know exactly what resources you need, as opposed to just what you’re using, you’ll be in a much better place to know how much cloud you really need. 

Another often overlooked cloud expense is how much labor will cost you to migrate your applications and data. A 2016 Forrester study showed that labor costs can make up over 50 percent of a public cloud migration’s costs. Think about that before jumping on the closest cloud.

Specifically,  Forrester noted, “systems of record are usually old and either completely or substantially custom-built.” This means “migrating these applications to public clouds requires substantial revision to achieve cloud’s primary benefits.” 

From what I’ve seen of these moves, “revision” isn’t the right word. You’ll need to write entirely new code. That’s a lot of new programming which, in turn, needs debugging and testing. It’s easy to see why Forrester estimates more than half of cloud migration costs will come from development costs alone.

So, before making that cloud move, examine closely both what you’re really doing with the data center you already have and just how much time and effort you’re going to need to shift  your applications. Then, and only then, will you be able to decide if moving to the cloud is really going to save you money. 

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