How to Estimate Your Cloud Migration Costs in 3 Steps?

Cloud Migration and Cost Estimation

Estimating cloud migration costs is a crucial step for organizations that are planning to move to the cloud. Understanding the financial landscape of migrating applications, services, and IT operations is key to creating a smooth and efficient transition. This estimation allows organizations to budget accurately, leverage the right services, and uncover cost-saving opportunities.

The importance of the cloud is reflected in industry statistics, such as McKinsey’s prediction that by 2024, most enterprises aspire to have $8 out of every $10 for IT hosting go toward the cloud, including various cloud models.

This article dives into the multifaceted world of cloud migration costs. We will explore the intricate details of pre-migration, migration, and post-migration costs, alongside resources for calculating costs, labor estimation, and insights from top cloud service providers like AWS, GCP, and Azure

Cloud Migration market’s value stands at 153.6 billion in the 2023

Benefits of Cloud Migration and Cost Estimation

1. Scalable Infrastructure: Cloud services allow for rapid scaling to meet fluctuating demands, enabling agility and responsiveness without significant capital investment.

2. Cost Efficiency: By estimating costs accurately, organizations can align their cloud strategies with budget constraints and needs, optimizing expenditure.

3. Enhanced Innovation: With the cloud’s vast resources and services, businesses can foster innovation, opening doors to new technologies and methods without a massive upfront cost

---

What costs are involved in Cloud Migration?

These costs can vary widely based on factors like the nature of applications, amount of data, required external support, migration timeline, and the chosen cloud provider.

Rewriting Applications and Code

Applications might need adaptation or complete rewriting to function optimally in the cloud environment. The time and cost involved here hinge on the complexity of the application and the necessary adjustments. While estimating this cost accurately can be challenging, a general range might be anywhere from a brief week to several months.

• Recognizing this ambiguity is vital, as it can significantly impact your migration budget and timeline.

Infrastructure and Design (DevOps)

Transitioning to the cloud entails creating the needed infrastructure through code, a task usually performed by DevOps engineers. Estimating the time for this aspect is typically more straightforward than rewriting applications. For instance, a small CDN platform might need 2-3 DevOps members and a few weeks to set up completely.

• Understanding the DevOps component aids in planning resources and timelines effectively.

Amount of Data to be Transferred

The volume of data to be moved to the cloud directly correlates with the migration cost. More substantial data amounts require more resources and consequently lead to higher expenses. Assessing the size and complexity of your data sets is thus essential in forecasting your migration budget.

Migration Time and External Support

A faster migration timeline can result in cost savings, as it allows for quicker decommissioning of on-premises infrastructure. Sometimes, external support may be necessary to facilitate the migration process. The cost of this support varies based on the scope of data transfer, internal expertise, and potential recruitment needs.

• Timely assessment and alignment with external assistance ensure a smooth transition without unexpected financial setbacks.

Cloud Provider Costs

Choosing the right cloud provider is a foundational decision that influences the overall migration budget.  Conducting a comprehensive cost-benefit analysis and evaluating the total cost of cloud ownership is vital. The decision encompasses various factors such as performance, security, compliance, and support, mapping them against the cost structures of providers like AWS, GCP, or Azure.

---

Step 1 – Evaluating Pre-Migration Costs

The cloud migration journey requires careful consideration of various pre-migration costs. This phase of planning ensures that the migration aligns with the organizational goals and budget.

Here’s how you can break down and evaluate these initial costs:

Current On-Premise Infrastructure Costs

Understanding the existing on-premise infrastructure costs lays the groundwork for comparing it with potential cloud-based solutions. Unlike cloud pricing, on-premises systems often require significant upfront investment in hardware, functioning on a Capex-based (capital expenditure) cost model. Some underlying costs might not be apparent, like hardware upgrades or specific component replacements, which can affect a server’s longevity.

Moreover, migration to the cloud means eliminating certain on-premises expenses.

• Network switches, uninterruptible power units, and network-attached storage systems become redundant when transitioning to the public cloud.
• Even operational costs like electricity and physical site security are erased during relocation.
• Building a baseline estimation of these on-premises costs helps in making an informed decision on the migration.

Application Inventory Analysis

Auditing your current IT hardware and software assets is crucial. This analysis includes collecting all asset specifications, performance data, details of running processes, and network connections. Tools like AWS’s Application Discovery Service can be instrumental in gathering information about on-premises data.

Application dependency mapping further reveals the intricate connections between services and apps, covering software, servers, storage, security, networking infrastructure, and data. Understanding these dependencies aids in planning and ensures a smooth transition.

Cost-Benefit Analysis

After assessing on-premises costs, cloud provider expenses, and application dependencies, a thorough cost-benefit analysis is indispensable. This analysis helps organizations gauge the potential return on investment and determine the most beneficial migration route.

• A company operating on legacy hardware might discover that migrating to a cloud-based IaaS solution would not only enhance performance and scalability but also translate into a 30% reduction in overall operational costs.
• On the other hand, an organization with recent infrastructure investments might find a hybrid solution more cost-effective, allowing for a gradual transition and capitalization of existing resources.

This kind of detailed analysis, backed by real numbers and strategic alignment, positions the business to make well-informed choices that cater to both immediate needs and long-term objectives.

---

Step 2 – Estimating Cloud Migration Costs

Cloud migration is more than a mere data transfer. It involves a plethora of changes and adaptations that must be accounted for when estimating costs. From redeveloping applications to redesigning network and security protocols, the price tag extends to various domains.

Application Redevelopment & Rewriting

Application redevelopment is a pivotal phase in cloud migration. This process includes application and database redesign, testing, release management for the cloud, and the necessary instrumentation for cloud monitoring and management.

• This includes rewriting algorithms, adapting existing software to cloud-native architecture, updating database compatibility, and integrating cloud monitoring and management tools.

Adapting existing applications to leverage cloud capabilities ensures they perform optimally in the new environment. This redevelopment not only enhances flexibility and scalability but also ensures alignment with cloud-native features, potentially reducing long-term operational costs.

Data Restructuring

Data cleansing, restructuring, and redistribution form the backbone of a successful migration. Properly restructuring data ensures it’s accessible, secure, and efficient within the new cloud infrastructure. This step may involve reformatting or cleaning data to adhere to new standards, but the investment in this process pays off with improved performance and reliability in the new system.

• This covers rewriting, transforming warehousing procedures, creating a new ETL (Extract, Transform, Load) framework, and implementing data cleansing techniques to improve accuracy and consistency.

Infrastructure Implementation

Implementing and maintaining development and testing environments is a complex task. It encompasses everything from design and provisioning to operations and maintenance. Tailoring the infrastructure to meet specific organizational needs requires careful planning and execution, ensuring that all necessary tools, processes, and structures are in place.

• This involves the design and provisioning of virtual machines, implementing containerization, automating scaling procedures, and setting up redundant systems for disaster recovery.

This meticulous attention to detail ensures that the organization’s cloud infrastructure is robust and ready to handle the demands of the new operational landscape.

Network and Security Redesign

Moving to the cloud necessitates a comprehensive network and security redesign, especially for hybrid cloud integration. This redesign involves reconfiguring network paths, implementing new security protocols, and automating integration between cloud and on-premises environments.

• This includes updating firewalls, implementing cloud-specific security protocols, redesigning VPN connectivity for hybrid cloud integration, and ensuring compliance with industry regulations.

Safeguarding data and maintaining compliance with industry standards are paramount, making this a critical aspect of the migration.

Integration of Cloud Applications with Legacy Systems

Integration of redeveloped applications with legacy data and systems, as well as other cloud systems (e.g., SaaS applications), can be a challenging task. Ensuring seamless communication between new and existing systems is vital for maintaining functionality and efficiency.

• This encompasses redesigning APIs, creating new middleware to facilitate communication between different systems, adapting legacy code to communicate with cloud services, and implementing robust authentication and authorization mechanisms.

Whether it’s connecting to legacy databases or integrating with third-party SaaS solutions, this phase ensures that all systems work together cohesively, leveraging the full potential of the cloud infrastructure.

---

Step 3 – Factoring in Post-Migration Costs

Post-migration costs are the ongoing expenses that continue after the cloud migration process has been completed. Here is a look at the relevant factors that should be considered.

Transformation Costs: Reskilling, Hiring

The transition to cloud operations often necessitates a change in the skillset of existing IT teams. This includes:

• Retraining and Reskilling: Upskilling employees may include workshops and certifications in cloud technologies such as Kubernetes or containerization, enabling them to manage modern cloud methods and solutions.
• Cross-Team Integration: Facilitating communication between IT and business units could involve regular alignment meetings, project management tools, and implementing Agile methodologies to ensure that cloud strategies serve organizational goals.

• Hiring New Personnel: Bringing in specialized cloud experts may be necessary if your organization lacks the required skillset for effectively managing cloud resources. Engaging specialized cloud experts might entail the recruitment of cloud architects, DevOps engineers, or cybersecurity specialists, each having specific roles in efficiently managing cloud resources.

Yearly Infrastructure and Licensing Costs

Running cloud infrastructure requires specific licenses and software subscriptions. These costs can include:

• Software Licenses: This can include acquiring licenses for cloud management platforms like CloudHealth, security solutions such as TrendMicro Cloud One, or monitoring platforms like Datadog.
• Cloud Service Subscriptions: Yearly or monthly subscriptions with major providers like AWS, GCP, or Azure, choosing between various service tiers or specific cloud services like Amazon RDS for databases or Azure AI services for machine learning applications.

System Maintenance and Operations

Maintenance and operations in a cloud environment are continuous endeavors that ensure optimal performance. These include:

• Software Patching and Updates: This involves not just updating the OS, but also managing regular updates to specific cloud services, applications, and security protocols, often using automated patch management tools.
• Monitoring and Alerts: Implementing monitoring solutions such as New Relic or Prometheus to keep track of performance metrics, combined with alerting systems like PagerDuty, ensure timely responses to any issues with cloud costs, infrastructure health, or security.

---

Using Cloud Migration Cost Calculator

When planning a cloud migration, precise cloud migration cost estimation is vital. Here are the tools and services offered by major cloud providers to assist in this crucial step:

How to Calculate AWS Migration Costs?

• AWS Migration Service: AWS offers comprehensive migration and modernization services that include automation and intelligent recommendations based on machine learning. These tools simplify and speed up each step of the transformation journey, from organizational planning to technical execution.
• Migration Acceleration Program (MAP): AWS MAP is designed to fast-track your cloud migration with outcome-driven methodology. This program leverages AWS’s vast experience in assisting thousands of enterprise customers with complex and time-consuming migrations.
• AWS Pricing Calculator: AWS’s Pricing Calculator allows you to get accurate estimates of service usage and expenditures. It’s an invaluable resource for understanding the potential costs specific to your planned AWS environment.

How to Calculate GCP Migration Costs?

• GCP Migration Documentation: Google Cloud offers extensive documentation for every stage of migration, from initial planning to optimization. This includes best practices, architectural guidance, and detailed walkthroughs.
• GCP Pricing Calculator: To estimate the costs of your specific Google Cloud environment, Google offers a pricing calculator. This tool provides you with tailored estimates based on your chosen services, usage patterns, and other relevant parameters.

How to Calculate Azure Migration Costs?

• Azure Migrate Tool: Azure migration costs can be calculated by the free Azure migration tool to help you discover, assess, and plan your migration. It includes technical and business insights for a smooth transition, enabling a phased migration to Azure that promises a higher ROI.
• Azure Database Migration Service: This service is specially designed for migrating databases to Azure with minimal downtime, supporting various database sources and targets.
• Azure Total Cost of Ownership (TCO) Calculator: Azure’s TCO Calculator is a user-friendly tool that offers an overview of the total costs associated with running your specific setup in Azure. It helps you compare the costs of on-premises vs. Azure to make informed financial decisions.

---

Conclusion

Embarking on a cloud migration journey requires meticulous planning and understanding of various cost components, from pre-migration assessments to ongoing post-migration expenses. Leveraging tools and services offered by providers like AWS, GCP, and Azure can simplify the process and provide accurate cost estimates.

If you’re eager to delve deeper into the world of cloud migration, cost management, and optimization, you may find these related topics beneficial:

• Cloud Cost Models 101: Understanding the 4 types
• Top 10+ Best Practices for Cloud Cost Optimization
• OpenAI Pricing, Monitoring & Cost Optimization: Open AI API, Microsoft Azure
• FinOps Performance Benchmarking: Measuring Cost & Efficiency 
• 8 Best Practices for Cloud Cost Monitoring in 2023

We hope this article has shed light on the complexities of estimating cloud migration costs and provided valuable resources to guide your decisions

---

How can we help?

Tired of your cloud costs building up? Don’t let cloud costs weigh you down anymore. With Economize, you can slash your cloud expenditures by up to 30% effortlessly. Book a free demo with us today and discover how we can help you start saving in as little as 10 minutes.