Maximizing Cost Savings In The Cloud

One of the primary business drivers for enterprises migrating to the web is cost savings. Generally speaking, cloud migrations have the potential to reduce allocations related to staffing, security and infrastructure. However, that doesn’t mean that migrations are cost free. Regardless of the move towards the cloud, there are real costs that need to be included in migration budgets.

According to Forrester, customer facing applications – or so called systems of engagement – are the easiest to move to the cloud. These applications are generally developed with new code bases, and utilize more modern infrastructures, paradigms and languages. Because they are more modern, and are developed for the web and mobile, they are inherently easier to migrate to the cloud when necessary.

Moreover, because engagement applications are often tied to marketing and consumer retention strategy, they are increasingly developed in the cloud from the beginning. By developing in the cloud, companies are able to capitalize on reduced development time, iterative testing and upgrades and faster rollouts. For these applications, the cloud works because speed is of the essence. With native cloud development, migration costs are negated, while revenue streams potential increase on release.

Migrating Enterprise Applications

The real challenge for migration goals can be found in migration of legacy tools. These mission critical applications usually have to comply with strict security, administration, privacy, maintenance and uptime requirements. According to Forrester, they are frequently “old and either completely or substantially custom-built.” As a result, they often require “substantial revision to achieve cloud’s primary benefits—on-demand scaling, pay-for-what-you-use economics, global availability, and high security.”

It’s this redevelopment of legacy applications – by developers familiar with both the cloud and the application itself – that accounts for the greatest expense in cloud migrations. As detailed in the report, “[L]abor costs dwarf infrastructure and platform services costs in most of the migration projects we’ve reviewed.” Once all necessary team members are accounted for – the strategists, developers, project managers, and compliance and risk analysts – labor costs often exceed 50% of total migration costs.

Managing Migration Costs

Given the significant up front labor costs associated with migration of legacy applications, some question whether they should be attempted at all. Should cloud migrations only occur when existing infrastructure upgrades are imminent?

Not necessarily. Waiting for an perfectly opportune time to upgrade ignores the future cost savings… including of labor… that cloud migrations enable.

Upon completion of cloud migrations, labor costs often diminish significantly. Among global enterprises, approximately 67% of the IT budget is spent on labor for application development and maintenance, hosting, security and end user support. These costs can be significantly reduced if not eliminated after migrating to the cloud. In a typical scenario, person to server ratios improve from 1:5 to 1:10 or even 1:15.

When combined with subsequent cost reductions pertaining to infrastructure, physical plant, utilities, agility and capital expenditures, cloud migration projects are still likely to result in significant return on investment.

Go Global

That said, smart institutions want to reduce costs as much as possible from the get go.

To further reduce migration costs, organizations should consider enterprise migration planning. By establishing an enterprise migration initiative, and creating interdisciplinary teams that specialize in migration planning and implementation, organizations develop clear visions for migration goals, establish governance models that define roles and responsibilities within and across teams and define performance benchmarks. Centralizing business, oversight and technical expertise in one team ultimately results avoidance of duplication of work, and savings through economies of scale.

With an enterprise strategy, migration planning and processing becomes more predictable, more time effective and less labor intensive with each subsequent project. By using knowledge gained in one project to inform another, organizations can develop migration plans that capitalize on existing experience and identify potential pitfalls more readily.

Conclusion

Labor costs are significant factors in determining return on investment for cloud migrations. While they, do decline over subsequent projects as teams become more familiar with migration protocols, they needs to be accurately accounted for during the planning phase.