​Cloud computing: How to build a business case

When planning a migration to the cloud, what do you need to take into account?
Written by Steve Ranger, Global News Director

Video: What is cloud computing?

Like any other major tech project, moving workloads into the cloud needs a solid business case -- one that takes into account all the likely costs and benefits -- before a company can decide whether it's the correct move.

Cloud migration may be a tougher proposition than a standard IT project because companies have to consider a wider variety of issues -- like what to do with all those servers, or even entire data centers, that may be made redundant by the move.

The business case should calculate the costs of migrating to the cloud -- which include the cost of moving systems over, as well as the cost of running services in the cloud after migration -- and then compare them to the costs of keeping systems in-house.

At a recent Amazon Web Services (AWS) event in London the company set out how it builds a business case for customers who are looking at moving services from the traditional on-premise model, where they keep their data and applications in their own data centers, to having them hosted in the cloud, and what companies need to take into account.

According to AWS, the business case has to start with the business objectives: why the organisation is intending to move to the cloud, and what it wants to get out of it. This is followed by the discovery process: understanding the existing infrastructure and associated costs.

"You need to drill down and do a detailed business case if you don't have that kind of information about your estate," said Mario Thomas, senior consultant of global advisory at AWS.

Depending on the customer, gathering and analysing that data can range from a one- or two-day project all the way up to detailed projects lasting several weeks.

"The reason for that is we are doing very high-fidelity data analysis, looking at servers and components and applications, peak usage of CPU and peak usage of memory, and averages of all those sorts of things. So we collect a lot of different data points that allow us to get to a very detailed business case," said Thomas.

Building a business case isn't only needed for a full-scale move to the cloud, Thomas added. It's also worth doing by companies using the cloud in different ways, starting with standalone cloud projects, as well as when companies are testing out a hybrid model.

Infrastructure business case

Thomas said that infrastructure savings can be the most significant part of the business case in terms of cost savings.

"We typically find that on-prem IT is about 45 percent utilised. That's actually quite high -- we know estates that are lower in the five to 15 percent utilisation space. That's a huge amount of excess capacity that isn't being used and is being paid for by companies. Companies buy for peak load... so you will overbuy to make sure you never have situations where you can't keep up with the load," he said.

Infrastructure costs that need to be factored in can include the cost of facilities like data centers, including the cost of lease time remaining and any penalties. The cost implications of an incomplete move to the cloud also needs to be considered: if some apps cannot be moved to the cloud and that means the infrastructure can't be reduced, or the data center cannot be shuttered, then those apps become a lot more expensive to run on their own.

Other factors to include are the cost of connectivity, such as leased lines. An obvious key consideration is the number of physical servers, virtual servers, and details of specifications like CPUs, cores and RAM. The cost of storage including SAN, NAS, and direct attached storage also needs to be added, as well as any potential upcoming hardware refresh plans that could potentially be avoided.

Depreciation and amortisation, plus data center management costs and the actual server utilisation needs to be added into the model too.

"Looking at the server usage pattern is also key to getting the right sizing," Thomas said. Other things to factor in include cooling, backup, compliance and certification, plus end-of-life and decommissioning costs, he added.

See also: What is cloud computing? Everything you need to know from public and private cloud to software-as-a-service

Applications business case

For applications there are a number of options ranging from leaving them exactly where they are, retiring them permanently, re-hosting them in the cloud unchanged, moving them to cloud with some changes, completely rebuilding them for the cloud or buying an entirely new software-as-a-service package. Each of these will have different cost implications.

Under application costs, Thomas said, issues to consider include:

  • The number of workloads, and how they map to physical servers
  • The cost of application changes, application maintenance costs, regulation and compliance
  • Licence transferability and upcoming licence renewals
  • Application requirements such as any SLAs, disaster recovery, security and access requirements

Staffing business case

The cloud business case also needs to include people costs, which can be second only to the infrastructure costs in some cases. Companies considering a move to the cloud need to consider, for both staff and contractors, the cost of recruitment, retention, replacement and retirement, training and development, plus the physical space requirement (e.g. offices) plus equipment and any other services. Companies also need to consider any other third-party costs and contracts -- including early termination policies.

It's also important to take into account more nebulous factors. Cloud advocates will argue that using hosted services allows companies to move faster -- for example by updating applications faster than was previously possible. But it's also worth bearing in mind potential cloud drawbacks, including the risk of being locked into one vendor for the majority of your tech infrastructure.


Cloud advocates argue that using hosted services allows companies to move faster -- but there are drawbacks too.

Image: Getty Images/iStockphoto

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