The ROI of Moving to the Cloud:  Are You Calculating it Correctly?

The ROI of Moving to the Cloud: Are You Calculating it Correctly?

Just imagine you’ve done your due diligence. You’ve tallied up the costs of moving to the cloud versus staying on premise. You’ve convinced the powers to be that it’s time to make a move. They’ve gone with your advice, and now you’ve relocated some of your applications to the cloud. You’re ready to be the hero— the person who helped your company save money while also making applications accessible anytime and anywhere.

For the first couple of months, everything goes as you had anticipated. Then the nightmare starts. On the third month, your bill from your cloud provider more than doubles. You’re shocked. What went wrong?

You dig through the invoice and soon discover you’ve been charged for network bandwidth usage that’s beyond what their Service Level Agreement (SLA) included.

How could you have made such a costly mistake?

Sadly, this type of scenario is all too common. Lurking behind such cloud cost-calculation disasters are three common missteps:

  1. Not reading the fine print in SLAs and understanding the parameters of the agreement
  2. Basing performance and utilization requirements for the migration project on skimpy historical data
  3. Assuming all the technology resources dedicated to the applications moving to the cloud are fully utilized

The imaginary scenario above is actually a true story. Here’s what happened.

The cloud vendor of one of our client’s included a limit for network bandwidth usage. They had wisely read the fine print, and they knew of the limitations. But what they had failed to do was to reach back far enough into their historical IT infrastructure performance data. They calculated their bandwidth utilization requirements based on the last 30 days of data. Had they instead looked at the previous years’ IT infrastructure monitoring data, they would have discovered quarterly spikes in bandwidth utilization that they needed to accommodate.

With this story as a backdrop, let’s look at the steps you can take to avoid falling into the traps that lead to miscalculating the costs and ROI of moving to the cloud.

Let Data Drive Your Cost Assessments

I mentioned that IT leaders sometimes make the assumption that they are fully utilizing any technology that’s currently devoted to the applications they plan to move. The problem with this quick, simple methodology for calculating costs is that it leads to over-provisioning which can be exorbitantly expensive.

You need to monitor the on-premise technology environment that supports the applications you’re moving to determine their actual needs.

  • What level of performance do you require?
  • What are your needs for capacity and availability?
  • Is there any cyclicality to your requirements?

Dig into the data from your performance monitoring solution, using as much historical data as possible, to create a specific needs profile.

Read and Understand Your SLA

To fully comprehend what your cloud vendor plans to provide and how much it will cost, read your SLA from top to bottom. Find out what’s hiding in the fine print and consider it carefully. That’s where the surprises that will blindside you tend to hide. I’ve seen it again and again, so don’t take this advice lightly.

Assess Your Current Technology Costs

This probably goes without saying, but you also need a baseline of the internal costs of supporting the applications you’ve chosen to move. Include not only the hardware but also software and facilities costs.

Once you fully understand your needs, what various cloud providers are offering, and how you will pay for their services, you can you start your ROI calculations. Tally up the costs and benefits of each scenario. Crunch the numbers of going with one cloud vendor versus another. Also, remember there are intangible benefits such as 24/7/365 access to applications from anywhere in the world.

If you’re cautious and use a step-by-step approach, you’ll be able to make a wise decision about cloud migration—one that saves money and increases the ease of using your company’s applications.

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