Are you a Cloud holdout? Almost every business uses at least some Cloud services now. There are clear and measurable benefits to using the Cloud. But any transition comes with a cost. You may wonder if the price of migrating your on-premises infrastructure is worth it. How much does a Cloud migration cost? We have answers.
What’s the State of Cloud Adoption and What Are Your Options?
The Cloud is the backbone of most U.S. companies now. The statistics show a steady rise in the adoption of Cloud services, including businesses morphing their core infrastructures into as-a-service models. By 2022, 61% of U.S. businesses migrated their data and workflows to the Cloud, and 92% of companies have a multi-Cloud approach to all business functions. In 2020, public Cloud spending was around $140 billion. In 2021, the number increased by more than $50 billion. Estimates assume these numbers will continue to rise.
Microsoft and other software providers are adding to the pressure pushing companies to migrate their legacy platforms into the Cloud. The costs associated with Cloud migrations didn’t prohibit these companies from seeking the benefits of these services. But you still may have reservations about the cost of such an undertaking. A few studies are out there now that shed some light on the actual costs of a Cloud migration.
Cloud Migration Costs: It’s Complicated
The costs of your Cloud migration depend on the volume of services you’re deploying and what Cloud services you’re adopting. There are three primary as-a-Service offerings in the Cloud:
- Software-as-a-Service (SaaS) offers access to fully functional applications such as Dynamics 365 Business Central in a secure online format.
- Infrastructure-as-a-Service (IaaS) provides the backbone of computing in the Cloud, including servers, storage, and networking.
- Platform-as-a-Service (PaaS) offers a building and testing environment for deploying software applications in the Cloud.
The cost of your Cloud migration depends on which of these services you’re leveraging. For obvious reasons, the higher the complexity of the service, the greater the cost. For complex migrations falling under IaaS, there is a road mapping process for the underlying strategy of how and when data migrates. You may choose an outside consultant to help you successfully launch in the Cloud and lessen the chances of service downtime—a recommended addition that adds cost but pays for itself in a smoother migration.
Cloud service providers calculate the cost of the infrastructure and deployment services by looking at several key areas:
- Size and complexity of your data
- Type of Cloud service you use (SaaS is the baseline service)
- Compatibility of your data with the Cloud environment
- Data security and compliance
- Migration approaches (lift-and-shift is generally less expensive than a graduated migration)
- Cloud provider pricing and the Service Level Agreement requirements
One of the benefits of Cloud migrations is that they take advantage of the economies of scale inherent in a shared service. There is also an element of savings related to eliminating the on-premises hardware, software and staff time associated with maintaining an in-house IT infrastructure. Not to mention the potential costs associated with a disruption to your legacy on-premises architecture. Forrester calculates this as the Total Economic ImpactÔ (TEI) of your Cloud migration.
What is the TEI of Your Cloud Migration?
The cost of your Cloud migration must be taken within the context of the business benefits and savings from outsourcing these services. A recent study determined the TEI of migrating Microsoft Dynamics AX (on-premises ERP) to a similar configuration using Microsoft Dynamics 365 in the Cloud. The businesses conducting this transition aimed “to reduce infrastructure and personnel costs associated with their Dynamics AX deployments while delivering the scalability and real-time data collection required to improve operations and power new opportunities.”
The TEI study found a significant reduction in the total cost of ownership (TCO) from the Cloud deployment of around 3.4%. The cost savings stemmed from:
- Consolidating on-premises licensing and support costs. While the average savings in this area was just over 8%, global companies with multiple on-premises Dynamics AX instances saved up to 20%.
- Avoiding on-premises infrastructure costs, including hardware and software refreshes, saved these companies $25,500 per server across the deployment. Eliminating ongoing maintenance costs, such as cooling and power, also saved $13,950 per server.
- Reducing the burdens of IT staff created productivity savings of up to 50% as network administrations reallocated to mission-critical and strategic tasks beyond “keeping the lights on.”
The calculated TEI also looked at some key business benefits of migrating to a Cloud-native ERP solution. The benefits included:
- Significant operational efficiency gains, including real-time data visibility for finance, retail, supply chain, manufacturing, etc.
- Increased profitability from scaling to meet eCommerce demands. One interviewee in the study estimated a $400M revenue gain because their Cloud migration allowed them to accommodate more orders faster.
- Improved Cloud functionality and usability, increased employee productivity by up to 9%.
These enterprise organizations reaped a 109% ROI with a real-time value of more than $8 million on average. But how does this compare with small to mid-sized organizations? The answer is that you will not only achieve ROI with a significant TEI relevant to the size of your business, but you will also avoid the risks associated with relying on a legacy on-premises infrastructure.
What Are the Risks and Potential Costs of Not Migrating to the Cloud?
Some organizations elect to remain on-premises because of the perceived level of control and security. Ironically, 95% of cyber security breaches result from human error. These errors often consist of failures to upgrade legacy software platforms. The other risks and costs associated with keeping your IT architecture in-house include:
- Increasing capital expenditures for hardware, software, and networking equipment.
- Maintenance costs for patching and troubleshooting the network.
- Utility and facility costs.
- The risk of disaster recovery to prevent data loss in case of a system failure or natural disaster.
- Lack of flexibility and scalability.
- Unrealized efficiency gains.
Migrating legacy on-premises applications and architectures to the Cloud can help you weather the storm of volatile markets, giving you a competitive advantage. Enavate is standing by with a Cloud evaluation to help you understand the workflows necessary to make these vital changes to your business.
Check out our Cloud Migration Checklist and start the conversation with our team.
