Economic arguments for cloud services migration

Additional On-Premises and Cloud-Based Data Centre Cost Considerations

For determining data centre costs, the following cost components would normally be considered – 1. For on-premises data centres:

A - Server costs B - Storage costs C - Network costs D - Infrastructure software costs E - Operational support personnel costs F - Platform costs G - Software maintenance costs (package software) including back-up and archive costs H - Backup and archive costs I - Disaster recovery costs J - Data centre infrastructure costs K - Software maintenance costs (in-house software) L - Help desk support costs

The total ownership cost (TOC) for a private on-premises data centre is additive for the parameters –

TOC = A + B + C + D + E + F + G + H + I + J + K + L 2. For hybrid cloud-based data centres:

ABC - Data centre infrastructure costs (including server, storage and network) D - Operational support personnel costs will decrease for private cloud data centre E - Infrastructure software costs F - Platform cost G - Software maintenance costs (package software) P - Management, of hybrid cloud and on-premises system Q - Data transfer from premises to an application in a public cloud R - Storage costs for working data and for long-term storage S - Customisation costs for applications to work effectively on the cloud T - Integration costs between off-premises and on-premises applications U - Platform compliance and certification costs:

The total ownership cost (TOC) for a hybrid private cloud with on-premises data centre is similarly additive for the parameters –

TOC = ABC + D + E + F + G + P + Q + R + S + T + U

The table below elaborates further on each of the cost components and indicates whether they are costs more applicable for private or public cloud schemes –

Cost Component Details For Private or Public cloud

systems

Private Public

Data centre infrastructure costs (ABC)

These costs will typically remain the same for hybrid cloud schemes. The floor space in the data centre will not be reduced by the removal of a few servers and cooling costs will not change much either.

X

Operational support personnel costs (D)

Set by the cost of support staff – For cloud schemes these are smaller. Staff effort freed from data centre maintenance will be allocated to management of cloud- based services.

X

Infrastructure software costs (E)

This will still need infrastructure management software even after moving part of workloads to the cloud.

X

Platform costs (F) For some application platforms, there is the need to maintain corresponding licenses to run applications in the cloud.

X X

Software

maintenance costs

(package software)

(G)

This can be calculated for packaged software, in

particular if it is tied to processor pricing, but it may be

difficult to approximate it to the cloud, where CPU

performance is virtualised and elastic. The software

license can be region-specific, but cloud services may

run globally.

X X

Management (P) Multiple environments – on-premises, in private cloud and on one, if not multiple, public clouds. People, processes and software can help with management, but they each have their own costs involved.

X X

Data transfer (Q) Costs are involved with transferring data from your premises to an application in a public cloud. This includes the fee to initially move your data to the cloud, access and/or move data from the cloud.

X

Customisation costs (R)

This applies if migrating an application to the public cloud that was on premises.

X X

Integration costs (S) In a hybrid model, it is possible to integrate various applications.

X X

Data storage costs (T)

As data and workloads are moved to a hybrid cloud, more long-term planning is needed.

storage costs.

X X

Compliance costs (U)

Compliance

(external or

internal)

Can be an increased cost when using the cloud. This is in addition to the existing on-premises audits. Compliance requirements might come from several sources:

• Vendors and partners: An example would be

credit card companies requiring companies who

accept credit cards to comply with the Payment

Card Industry Data Security Standard (PCI

DSS).

• Customers: Customers may require production

of reports to prove various compliance

requirements.

• Governmental bodies: Such organisations

may need to comply with local, national or

international compliance standards. These

include Health Insurance Portability and

Accountability Act (HIPAA) and Sarbanes-

Oxley (SOX),

• Internal compliance: The organisation may

have established its own compliance

requirements.

X X

Table 1: Hybrid Cloud Cost Components

We can give specific cost estimates – Traditional on-premises data centre costs: The cost of running a traditional data centre for a medium-to-large-size company is estimated between USD $15 million and $25 million, where the costs breakdown is as follows –

• 42 per cent of costs for: Hardware, software, disaster recovery arrangements, uninterrupted power supplies and networking. The costs are amortised or spread over time, because they are a combination of capital expenditures and regular payments.

• 58 per cent of costs for: Heating, air conditioning, property and sales taxes and labour costs. (In fact, as much as 40 per cent of annual costs are for labour alone.)

Hybrid cloud-based data centre costs: For hybrid cloud-based data centres, the following cost factors are at play, with percent breakdowns as shown:

• Labour costs – estimated as 6 per cent of the total costs of operating the cloud data centre

• Power and cooling costs – estimated at 20 per cent

• Computing costs – estimated at 48 per cent The cost of running a hybrid cloud-based data centre for a medium-size company is quite variable, depending on the CSP, the balance between on-premises/cloud activity and the way the cloud infrastructure is configured. Rough estimates would put the figure for a mature hybrid cloud-based data centre at somewhere between USD $5 million and $15 million, which is significantly less than the on-premises data centre cost.

There are a variety of online cloud cost calculator tools that are available for companies wishing to estimate the comparative costs of having their data centre in the cloud (e.g. Plan-Cloud – url: http://www.planforcloud.com/ and its present replacement – RightScale Optima). The projections can be carried out for when cloud services are provided by Amazon AWS, Microsoft Azure, Google Cloud Services and other CSPs. AWS and other leading CSPs also provide similar cloud cost estimation tools. Finally, the figure below provides a graphical comparison of TOC (Total-Ownership-Cost) breakdowns for different cloud deployment models –

Figure 1: TOC (Total-Ownership-Cost) breakdown for different cloud deployment models

(Available from VMware Report)