Will Moving to the Cloud Save You Money?

There are a lot of good reasons to move your business technology to the cloud: the practically limitless scalability, faster data recovery, and–of course—potential cost efficiencies. But notice we said potential. Many companies go into a cloud migration process thinking they will save money automatically and off the bat. The reality is that the cloud can and often does save companies money, but only if you build your system in such a way as to promote cost savings. Even then, it tends to be a long-term payoff rather than a short-term windfall.

Cloud Cost Considerations

When organizations move to the cloud, it doesn’t always give them the immediate payoff they expect. Generally, this very common scenario is a matter of expertise and optimization. The cloud might seem simple, but it is really a vast network of computer systems as physical and tangible as the data center you might be working in now—only much larger and more complex. Each cloud provider’s system is also completely proprietary, requiring provider-specific and often engineering-grade knowledge to properly shift your current system to the cloud so that it functions optimally (i.e., most cost effectively) in its new environment.

The challenge for most organization planning a cloud migration is that they don’t have the in-house technological capabilities to build in the cloud in a way that supports success The cloud is based on micro-service oriented programming (i.e., decoupled services), which is not how the most companies operating in an on-premises environment function. Most likely, you are running on a virtual machine or a server that contains all of your components—database, applications, and web server—installed only on that piece of hardware. If you put that up in the cloud as is, you're going to actually pay more. However, if you are able to decouple your services, meaning your database, applications, and web server are each their own layer of compute, then when you put it in the cloud, you have the opportunity to optimize. Your components become elastic; they can scale up and down. As a result, you can control your costs, because in the cloud, you only pay for what you use. That's why optimization is so critical. You can very easily waste data and overpay for your cloud services if you’re not constantly monitoring your data performance and adjusting accordingly.

Ideally, you will have accounted for this step before you ever migrate, but most in-house teams aren’t even aware they need to build this way. Rest assured though that if you are already in the cloud and struggling to realize cost efficiencies, you can still audit your performance to assess what changes you need to make to save money. Using the data analytics that are provided and configured in the cloud, a managed service provider like PCI can identify where you are over-provisioned and make recommendations with regard to leveraging automation strategies that will allow you to dynamically expand and contract your environment to bring your costs down.

The Upfront Costs of Migration

Migrating to and operating in the cloud is a major undertaking, and there are likely costs to both that you haven’t considered or factored into your budget. Here are some (but not all) common costs that get overlooked along the way:

• Built-In Bottlenecks

If you have a lot of data to migrate, cloud providers will intentionally throttle your migration. This helps protect their network channels from data overload. In effect, you can only move so much data up at a time, which means migration will take longer and happen in a more piecemeal fashion than you might have anticipated. And as we all know, time is money.

• Licensing Software

licensing may be a separate cost depending on whether or not you purchase licenses through your cloud provider’s marketplace. Generally, you have an option to either bring your own license, which means you purchased the license separately from the manufacturer or the licensor, or you buy the license at the time that you procure the item from the cloud marketplace. It’s worth noting that if you are a Microsoft-dependent organization, licensing considerations alone might determine your cloud provider for you. That is, it is generally much less expensive from a licensing perspective to run your system in Microsoft Azure. Other organizations have a little more freedom to choose. You might opt to use Amazon Web Services, for example, which necessitates far fewer licensing considerations because it’s open source and runs on Linux, which is free to use.

• Security

Most companies are well aware that they need to account for security, but it’s also commonly believed that the cloud is natively secure. Truthfully, it’s actually less secure than the private data center you plan to leave. If you don't map to your provider’s security best practice standards or add security of your own, you will be vulnerable and perhaps non-compliant, depending on your industry, making security an often overlooked or misunderstood cost.

Keep in mind that as daunting as these upfront costs may be, they are ultimately saving you from making a huge capital investment in new storage devices and other on-premises hardware upgrades. Note, too, that the cost savings associated with moving to the cloud may reveal themselves in different areas of your organization. Many companies end up realizing operational cost savings, as the cloud eliminates the need to upkeep and manage physical infrastructure. Moving to the cloud can also engender performance improvements that result in workflow efficiencies that drive revenue and profitability.

As for comparing costs among cloud service providers, things aren’t so clear cut. They each offer slightly different pricing models and discounts and make frequent price cuts. And of course, not all customers will pay the sticker price, especially at the enterprise level, where volume discounts can be negotiated with sales representatives. In general, though, their prices are roughly in line with each other. To get a better idea of what a cloud provider may charge you, you can play around with cost calculators. Here’s one for AWS, Microsoft Azure, and Google Cloud.

Of course, the calculators don’t account for the less-obvious costs of migration and are only as good the information inputted.