IT in Manufacturing

How to avoid costs going through the roof when moving to the cloud

April 2023 IT in Manufacturing

Sarthak Rohal.

The world has changed immensely since on-premise infrastructure was considered the best option for company applications. Today, most companies have begun shifting toward off-premise options, such as cloud and co-location. But how do they determine which is best − should companies make cost a primary deciding factor when choosing to migrate? Is it fair to make such a cost comparison between on-premise and cloud systems? Before any company switches to cloud computing technology, they need to understand the pros and cons of both options for specific workloads. This is because there is no clear winner between on-premise vs cloud computing solutions, even from a cost perspective.

All costs considered

With on-premise, the company uses in-house dedicated servers, which must be obtained with considerable upfront investment that includes buying servers, licensing software, and hiring a maintenance team. In-house infrastructure is not as flexible for scaling resources, while not using the full potential of the setup results in undesirable operating costs.

Cloud computing, however, has little to no upfront costs. The infrastructure belongs to the provider, and the client pays for usage on a monthly or annual basis, depending on service or units consumed and time used. There is no need to spend money hiring a technical team, because usually the service provider is responsible for maintenance and uptime. In this respect, regarding pricing, cloud computing has the upper hand. Not only does it have a pay-as-you-go model with no upfront investment, but it is easier to predict costs over time. Conversely, in-house hosting is cost-effective when an organisation already has servers and a dedicated IT team. However, cost is not the be-all-and-end-all of decision making, but only one of the many factors which need to be considered before any public cloud migration, such as:

• Current infrastructure utilisation.

• Service accessibility in the region.

• Application workload analysis.

• Data protection.

• Data security and compliance.

Advantages over costs

Even with simplified assumptions, calculating hard-dollar cost comparisons between cloud and on-premise infrastructure is complex. Price can vary wildly, depending on the specifics of the system being deployed, but for midmarket and enterprise businesses, cloud-based solutions represent a potential cost savings of 30% of the total cost over five years. But if cost is not the ultimate influencing factor, what else should companies be looking at? The advantages of public cloud include faster time to implementation, net present value, flexibility, reliability, security, and scalability.

Risk, value, and change management

Migration costs must be weighed against value gained, and here, change management is critical to unlocking a successful transformation. Moving to the cloud will mean different things depending on the company’s journey and business needs and therefore, the cost of migration will correlate. In such moves, the human tendency to be apprehensive about change is often a bigger risk to a cloud migration than any technological challenge. A lack of end user engagement, communications, and training during a cloud transformation adds to these worries. Organisations must utilise change management to ensure that the human side of a digital transformation goes as smoothly as the technological side.

Choosing the migration strategy

Cloud migration is the process of moving some or all the company’s digital operations to the cloud. There are three main types of cloud migration: on-premise to cloud, cloud to cloud, or cloud to on-premise. By analysing the complete IT system, we should identify infrastructure and application workload, and map these with appropriate cloud migration strategies. Such assessment will determine which strategy to use, and which part(s) should move to the cloud.

Cloud migration strategies were first defined in the Gartner 5 Rs model in 2011, as:

• Lift and shift: moving applications to the cloud as-is.

• Refactor: tweaking applications to better support the cloud environment.

• Re-platform: shifting without major changes to leverage cloud benefits.

• Rebuild: rewrite the application from scratch.

• Replace: retire the application and replace it with a new cloud-native application.

Beware the hidden costs

The cost of migration depends on what moves to the cloud, and what remains on-premise. However, companies must be aware of the hidden costs that lurk in cloud migrations, as public cloud is a consumption-based service model that can be difficult to measure. These may include:

• Data transfer costs: Moving the data from the cloud or enabling the customers to pull down data is not free with any of the major cloud providers.

• Cloud utilisation costs: Public cloud providers charge a fee every time a company attempts to access its data. While the fees are tiny, sometimes fractions of cents per hour, cloud providers are banking on high volume.

• Business process re-engineering costs: While organisations expect a cloud migration to improve efficiency and functionality across the board, this requires an investment in business process re-engineering to fill the gaps in understanding, links, security, and performance issues that cloud migration raises.

Careful consumption management

There must be a complete understanding and analysis of IT systems, before making a move on the public cloud. Most importantly, after migration, public cloud services must be carefully managed to achieve specific reliability and availability goals, which include network availability, planning for disaster recovery, testing application, database stability, and planning for redundant infrastructure. Without careful management of consumption, the hidden costs of public cloud can cause organisations to regret their choice to migrate.

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