How to Estimate the Cost of Cloud Migration
How much does cloud migration cost? This is one of the most frequently asked questions by businesses burdened by legacy systems. While the final cost of moving to the cloud is exceptionally project-dependent, there are still some frameworks, approaches, and strategies to make a quite accurate estimation at the beginning of the migration process.
In this article, we will discuss how to estimate the cost of cloud migration and which specific points to keep in mind.
Cloud Migration Cost: Definition and Milestones
Cloud migration costs are the expenses covering the process of transferring data from previously used legacy software that no longer performs its functions to the cloud environment. The process as a whole is quite complex and challenging.
What’s more, there are always many project-specific tasks and bottlenecks, which are difficult to estimate at the early stages of migration. That’s why 50% of companies that recently moved to the cloud reported that estimating the cost and staying on a budget was the biggest challenge for them. The cost of moving to the cloud may be high, but the cost of not moving to the cloud is even higher. Let’s look through the cost breakdown.
What cloud computing benefits exist for every organization? Read in our blog post. 10 Key Advantages of Cloud Computing for a Business
The Cost of Moving to a Cloud Environment by Milestones
Before launching a cloud data migration project or building a cloud-based architecture for apps from scratch, you have to take all the pitfalls into account, develop a data migration strategy and foresee the associated risks. Feel free to use our dedicated guide as your starting point.
The first step is choosing the type of cloud solution that suits your business. There are public, private, and hybrid clouds, and the features of each one can be tailored to the business specifics.
Next, you have to choose a cloud service model and only then proceed with cost allocation and distribution. In a nutshell, data migration means switching from capital expenditures (CapEx) to operational expenditures (OpEx).
In most cases, the latter model is always more feasible since you are moving from traditional hardware and software ownership to an as-a-Service model, which may cover Software as a Service, Infrastructure as a Service, Platform as a Service, and Artificial Intelligence as a Service. Compared to these models, traditional hardware requires much more investment in its purchasing or paying software license fees.
Regardless of the model you choose, the cost of moving an application to the cloud can also be evaluated according to the data migration project milestones. Each of them should be planned and estimated separately to develop a holistic picture and realistic budget.
This initial stage usually concerns defining the reason for switching to the cloud environment, pinpointing core pains, evaluating the amount of data you have to transfer, and choosing the cloud provider you would like to go with. All these preliminary measures should already give you a big picture of the related costs to expect.
At this stage, your cloud migration cost will be related to the following aspects:
- On-premise data management, which includes preparing to cover expenses for establishing and managing:
- new storage, infrastructure operation, server powers, performance resources consumption, compensations for involved experts, software licensing, maintenance of the new hardware, warranties, tech support, and necessary app updates.
- Database upgrade — your DB must be compatible with the specifications of the new system you are looking to migrate to. This may require a software upgrade that may occur beforehand, either on-premise or in a specified public cloud infrastructure environment — processes spawn completely different scopes of expenses.
- Consultations of cloud migration vendors — this kind of assistance may be precious for your migration project if you lack in-house specialists savvy in the whole process.
- Testing the demo versions of cloud solutions — here, a testing cloud environment rent must be covered.
- Possible Proof of Concept — it can help you determine how the whole data migration intention fits your business needs in real life and estimate costs more clearly before going for full-on migration.
Don't forget to clarify these 10 things for the successful cloud migration. 10 Critical Questions About Migration to the Cloud
This is the most time and money-consuming process since, at this stage of cloud migration, your data should be accurately classified according to the platform’s requirements and securely transferred to a new system. At this step, you will have to pay for:
- The migration itself — the fee you will need to pay to the cloud vendor for migrating to their system, plus the labor costs of your data migration company if you hire a third-party team for this project. You should also remember that if your legacy system continues to work during data migration, you will incur additional costs on the system support and syncing up the data.
- Application and code changes, new infrastructure development, and setting a new system up according to your business requirements.
- Refactoring, i.e., making your applications and data new system-compatible where it couldn’t be prepared at the pre-migration stage.
Post-migration involves taking care of the proper further support for your cloud infrastructure, which implies:
- Monthly or yearly licensing or support costs of maintaining the established infrastructure and related software.
- System operations and maintenance, administration, monitoring, updates, and staff training on the new system.
The costs could also be classified as direct and indirect. While the first ones are related to the data migration process precisely (for example, the cost of hiring a dedicated data migration team), the second ones are mediated expenses (for example, the cost of supporting your legacy system during data migration).
Factors Affecting the Cost of Moving to the Cloud
According to the research, “The blunt answer to the question ‘How much will a migration cost?’ is, “It depends.” So, the final cost of cloud migration depends on the following factors.
The size of the cloud migration project
The size of the cloud migration project also directly affects its cost. For example, the cost to migrate the data of a medium-sized company will be lower compared to the cost of data migration from a multi-tenant system. The latter case means more requirements to the system workload and, consequently, more efforts to plan the project, outline your strategy and allocate a budget.
Tip: Regardless of the project side, there are some opportunities for cost savings of moving data to the cloud and mitigating related risks. For example, moving all the data you have to the cloud will always be more expensive than a step-by-step migration strategy. That’s why you can consider getting started with migrating the most crucial data and operations as the first step towards data migration.
Moving, integrating, and testing challenges and specifics
The most common challenge in moving data to the cloud is to keep the legacy system working to avoid downtimes. That is, the business owner and the database migration services provider should think about it in advance.
The fee you have to pay to your migration vendor may also be different, and in this case, the company’s location isn’t the only factor that matters. Different companies use their practice-proven sets of tools and approaches, and in this case, you are paying not only for service quality but also for the vendor’s reputation, reliability, and data safety. The time spent on the data migration process may also vary depending on the company’s experience and expertise.
Chosen cloud services
AWS, Azure, and Microsoft offer different pricing plans to use their solutions. Still, their offers are pretty diverse to find the one that suits your business needs most, but this is one more factor that affects the cost of moving to the cloud.
3 Approaches to a Cloud Migration Cost Estimate
How to estimate the cost of moving to the cloud? Below are three main approaches.
#1 Analogy Approach
As the name suggests, this approach allows for making a cost estimate by following the logic and milestones of some previous data migration projects. Keep in mind that, in this case, you have to partner with a data migration vendor with experience in moving data to the cloud for the business from your niche.
#2 Expert Judgement Approach
According to this strategy, the cost estimate is made proceeding from the knowledge, expertise, and competency the development company already has. Since moving data to the cloud is one of the decisions modern businesses frequently make, getting in touch with the experts on this matter shouldn’t be a challenge.
#3 Algorithmic Model Approach
This methodology implies coming up with a formula to establish the relationship between dependent and non-dependent variables. This approach may be used for rough calculations only since it can’t take the project’s specifics into account.
The same approaches are also suitable when building a cloud-based for apps.
How to Estimate the Cost of Cloud Migration
1. Take inventory of your current IT infrastructure. At this stage, you have to analyze your current costs, set the cost reduction metrics you want to achieve, and shortlist the first data arrays and operations you would like to move.
2. Find out the cost of using a cloud service with the help of a cloud migration costs calculator. Below are the calculators shared by the most popular cloud providers. You may find out the approximate price for using their solutions by specifying your workload and the necessary computing power, request processing time, and other important factors. We recommend using these calculators:
To come up with more realistic estimates, consider getting in touch with a cloud migration vendor. Their practical experience can be quite helpful if you intend to hire a dedicated team for cloud migration. You can also ask your in-house consultant for support and check the estimates from both sides.
3. Calculate your cloud migration costs with your migration vendor. As you partnered with a cloud migration vendor to evaluate your project specifics, get competent consultation on a final cloud provider choice, and estimate your costs more accurately.
Consider partnering with those with experience in legacy system migration to be sure about your data safety and with diverse experience in data migration, since in this case, the company will be better able to predict the possible challenges and bottlenecks and estimate the final cost more accurately.
How to choose a qualified modernization vendor who'll guide you through the migration? Just ask 9 Questions to Validate Your Legacy Modernization Vendor Before Starting the Cloud Migration Process
4. Foresee and allocate the post-migration and possibly additional or risk-associated costs. The process of migration doesn’t end after transferring your data to the cloud. At the post-migration stage, you will have to pay maintenance costs.
Ready to transfer your data to the cloud, increase your business efficiency and cut costs on the legacy system maintenance? Get an estimate of cloud migration!
5 Tips for Cloud Migration Cost Savings
While there are predictable and less predictable things that affect your data migration project costs, there are still some ways to cut them based on our experience in data migration projects.
#1 Define the amount of data you have to move to the cloud
To save on cloud migration and make it more affordable, get started by defining the data arrays you would like to move to the cloud first. This strategy will allow you to pay less and test the ways cloud data management helps your company evolve.
How to test a legacy codebase without breaking anything? Learn here. Testing Legacy Codebase: What is, Common Problems and Best Practices
#2 Choose the right strategy
There are a lot of legacy system modernization strategies such as rehosting, re-platforming, etc. All of them have their technical specifics, but choosing the right strategy will allow you to achieve the highest efficiency at the lowest costs.
#3 Choose an effective pricing model suitable for your business needs
Since cloud solutions are provided to the companies according to the Software as a Service business model, you may pay for the resources actually used. Still, the Pay As You Go approach may be quite costly, for example, if the working load suddenly increases. To find out the most effective pricing model, measure your current resource utilization and use this indicator as a reference when building a cloud architecture.
#4 Consider reserved instances for better predictable workloads
Reserved instances provided by Amazon AWS or Azure VMs are the cloud usage opportunities that allow you to set continuous computing power and its cost limits. Using this option is a way to create better predictable workloads and plan your cloud management price more accurately.
Are you overpaying for the AWS cloud and infrastructure? Then, read this article. 7 Foolproof Ways to Reduce Your AWS Costs in 2023
#5 Partner with an experienced cloud migration vendor
Lastly, make sure to partner with a reliable cloud migration company. Their real-life experience will allow you to avoid costly mistakes, compatibility issues, and their reputation can be a guarantee of protection from data loss.
Consider ModLogix as Your Trusted Cloud Migration Partner
ModLogix is a software modernization company with extensive cloud migration expertise backed up by years of experience in tech.
As for our data migration experience, we welcome you to review our case study. Our customer from the healthcare industry faced the need to replace their legacy application because of the lack of effectiveness and talents necessary to support it. The challenge and specifics of this legacy software modernization case study is the necessity to pay ultimate attention to sensitive data safety and follow HIPAA requirements during data migration and post-data migration.
In our practice, we stand for transparency, compliance, ultimate data protection, and strong coding philosophy, so you are welcome to get in touch with us and find out how we can help your business grow by utilizing the latest tech once evolved from a legacy.
The cost of migrating your data to the cloud is always project-specific. There are various approaches to estimating costs, but this is just the case when real-life practice may suggest better insights than theory only. Our diverse experience allows us to make a project migration cost estimate as accurately as possible using an effective mix of knowledge, skills, and practices.