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451 Report: Cost Management in the Cloud Age
Migration

Forecasting Your Cloud Migration Costs

By David Winter on October 16, 2018
A cloud migration may seem like a daunting undertaking. But with the right information and expertise to back you up, you can plan for costs and have a clear forecast of what to expect.
forecasting a cloud migration

When an enterprise decides to migrate some or all of its workloads to the cloud, there is a planning process that must come first. A cloud migration can sound intimidating, but it gets much easier when the relevant teams and individuals know what to expect.

Migrating to the cloud definitely isn’t an overnight process, especially when it comes to more complex configurations, like those that involve refactoring. Of course, no two migrations are the same, but we’ve devised a forecasting model to show you what to expect, and why, so your teams can plan as effectively as possible.

How the Process Works: Costs and Savings to Expect

It’s critical to avoid disruption to vital business or product services when undertaking a migration. The only way to protect against these disruptions is to ramp data center costs down while simultaneously ramping cloud spend up.

Of course, there are some other costs associated with the migration or refactoring itself. These will balloon in the middle of the transition. We call this the “migration bubble,” and it encompasses the “cost to execute.” This is a transient cost that ramps up at the start of the migration and tapers off at the end.

The objective of migration business case planning is to model where a return on investment inflection point will take place. This is the point where the cost savings you recognize as a result of the migration have offset all the costs you’ve put into executing the migration, and you’re truly now operating at a net improved Total Cost of Ownership (TCO). The point in time of this inflection point is usually the key objective for enterprises asking, “How soon are we really saving money?” Changes to the plan will change your ROI inflection point. Moving faster could cost more, but might avoid a hardware refresh or data center lease renewal. Moving slower could cost less, but the inflection point may be pushed out further.

Visualizing Your Migration Forecast

The model indicates the typical forecast for a cloud migration from a data center to cloud computing environment. Along the left side, you’ll see a small amount of existing cloud spend with large data center costs. On the right side, you’ll see the the positions have essentially flipped, with a new, more efficient cloud spend and a data center spend that’s lower than the original cloud spend. (A data center or on-site spend can be drastically reduced, but may never truly go away.) In the middle, you’ll see the migration bubble that includes the cost to execute and covers any gaps during the transition to the cloud. You’ll also see the point at the end of migration where your cloud spend is expected to provide the same amount of computing resources your data center provided for less.

Timing: When To Expect Benefits

Take a look at the timeline along the bottom of the graph — a full migration will yield benefits in the first year, but the long-term benefits are where a cloud migration really shines. Once you have a strong cloud architecture, you can expect increased efficiency and better resource use in the future of your company. Remember, the chart above is an approximation. Depending on your business needs and other factors, your forecast should have the same general shape, but it will change to fit your specific migration.

Over the last seven years, we’ve collected cloud spend information from thousands of customers that cuts across different industries and encompasses a wide variety of company types and sizes. Our cloud financial analysts construct similar forecasts to the one above customized for each business. By pulling data together that includes the customer’s timeline, the cost of execution, previous migration patterns, optimization assumptions and more, we’re able to create an accurate forecast of what to expect during migration.

Now, what happens when things inevitably change during the process? Well, that’s where continuous audits come into play.

Leave Room for Audits to Your Plan: Expect the Unexpected

“No plan survives contact with the enemy.” – Helmuth von Moltke the Elder

The purpose of a migration business case is to help an enterprise make a decision to move in a direction that will be beneficial to their business objectives. However, once you start moving, sometimes the math in the business case is quickly forgotten. Your business case is filled with assumptions on how your migration will be operated. Without constant comparison to the original assumptions to ensure they’re being fulfilled in migration operations, you may have trouble succeeding.

Change is the only constant. No matter how perfect your migration plan, it will need to be audited and updated throughout the migration process. Every migration has a lot of variables at play, which can easily change without notice over the several years your enterprise spends migrating. If you try to stick to your plan no matter what, you’re just asking for failure, especially if you’re trying to measure success against that same plan. Instead, you should be open to refactoring the plan in response to new data turned up by a migration audit.

There are many places where every plan should be checked and monitored during the process of execution. Generally, these can be lumped into external influences and internal influences. External influences include everything from market changes to new features, competition and services in the public cloud. Internal influences can come from mergers and acquisitions, expense changes from things like the fluctuating price of oil, and reorganizations or changes in leadership. Try as you might, you’re never going to be able to predict all of these in your initial plan. Instead, be willing and eager to re-evaluate your plan and adjust it so you can achieve your original goals. Even better, take advantage of the changes to improve on them.

Get Individualized Planning and Support for Your Migration

This general plan will help get you started, but there is truly no substitute for having expertise and experience on your side throughout this process. If your organization needs customized migration planning and support, get in touch with one of our cloud financial experts today.

Want to read more about cloud financial planning and management? If you’ll be at re:Invent this year, you can reserve your copy of our cloud financial management guide.

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