The ROI of moving to the cloud

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When it comes to cloud migration, customers need to understand what migration will cost them, why, and at what point is it an ROI. Expert Tejas Vadalia explains all the factors involved in his blog.

A common question customers have when moving to the cloud centers revolves around what the ROI is on their investment and whether it is worth doing.

Before, customers were interested in knowing what the cloud is and how it will help their organization. Today, they have either already adopted it or are ready to do so and want to understand how they will benefit and what costs they should consider.

There is no direct way of measuring cloud ROI. And while there are various views on cloud cost savings and what constitutes real savings, the real measure can only be associated with the factors that are driving the organization to move to the cloud. For instance, if an organization is measuring ROI by comparing the cost of hosting in cloud v/s on prem, then at times the benefits might not seem substantial. But migrating to cloud has many other associated factors that can lead to direct and indirect benefits, and eventually, ROI. Common drivers include:

  1. The desire to move away from the data center
  2. Heavy dependency on third-party managing infrastructure
  3. The need to reduce costs
  4. Time to market
  5. The drive to improve business agility and reduce technical debt

To achieve this, the customer needs to understand what it will cost them, what parameters can influence the cost, and at which point can it be considered an ROI.

There are various costs that can affect overall ROI. These include the initial investment, implementation costs, and support cost.

Initial investment:
Moving to the cloud will have an initial capex that includes defining and establishing additional security standards and governance, and training and hiring cloud talent. An immediate cost benefit can be achieved by early identification of decommissioned applications and decommissioning them.

Implementation cost:
The implementation cost will include the cost of migration and/or modernization, running parallel environments, and hardware costs. It is crucial that detailed assessment be carried out. This will avoid misguided investments and hasten a quick ROI. Such an assessment includes:
– Correct landing zone
– Selection of the right cloud provider
– Integration system
– Infra consolidation
– Rightsizing

Another cost that should be considered during migration and that can have a large impact is the licensing cost. Licensing cost can come for unsupported OS ad DB versions or COTS application. The right assessment can help establish the right decision on modernization, which will help and plan right migration approach.

Support cost:
Building a completely new environment will involve the additional cost of management and monitoring. Most organizations go with same tool, which may or may not be the right fit or may not be able to use cloud features in an optimized way. There will also be a spike in cost due to:

– Management of multiple environments until exit of DC
– Additional tool cost
– Cloud talent

This cost can be reduced with:
– Right size VM
– Consolidation of storage.

So, how do you measure ROI on the cloud?

Measuring growth or success in the cloud is never a direct measure of cost. It involves many direct and indirect variables. Success isn’t tied to IT costs alone; it also has to be linked to the goals of the organization and  ROI should be clearly defined upfront to measure against completion.

  • Cost: Definitely, cost is one of the major factors. In our experience, most clients start seeing an ROI within three to five years by considering:
  • Moving workloads to the cloud: Moving as much workload as possible to the cloud. It has to be planned as a journey to the cloud and reduce as many footprints as possible for eligible workloads.
  • Business agilityAutomate, build, and release; incorporate agile and DevOps; move to cloud-native iterative dev, gaining time to market and business agility for critical applications.
  • Scalability: Design and plan scalability and HA to meet growing business demands, peak increases and drops instead of procuring extra workload like on premises.
  • Operational excellence: Optimize application performance; optimize application portfolio; and reduce redundant processes. Modernize the portfolio by going on PaaS or CaaS, reducing operation overload.

With data from the discovery tool, CMDB, and application details, we help organizations migrate to the cloud by leveraging our propriety eAPM tool. To find out more about eAPM, click here. We have helped our clients move from traditional ways to the cloud with the help of our partners. Here are few examples: Home Office & Telenor Connexion.

We provide the business case to support, design, and plan

Forecast a three to five year cash flow and savings

  • Current state hardware and managed services costs
  • Future state hosting and managed services costs
  • License costs
  • Migration costs

For more information about how our methodology works, please reach out to me via my Expert Connect profile.

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