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When considering Cloud options for your business, comparing the cost of on-premises infrastructure with a Cloud infrastructure is essential. Knowing how both options compare can help you gain a better understanding of the value to your organization.
Moving to the Cloud will mean different things depending on your journey and your business needs, and the cost of your migration correlates.
If you’re only migrating your infrastructure to a hosted Cloud, that process is less involved, which may take less time and expense.
“If you’re just moving infrastructure to the Cloud, like your file server and things of that nature, you’re going to use something called Infrastructure as a Service (IaaS). You replace the hardware you’re running along with the operating system and applications, but they run as if they were on your premises. They run on a server, but now that server is in the Cloud. It’s sometimes called ‘lift-and-shift.’” – Pablo Saez, ISV Sales Leader, Enavate
If you’re implementing individual Cloud services, that’s referred to as Platform as a Service (PaaS) and will be less labor, time and cost-intensive. If you’re only migrating one or two applications, such as your email server, that may also be less work.
Here, we’ll focus primarily on costs related to a complete migration to a Cloud ERP environment and Software as a Service (SaaS) versus staying almost entirely on-premises. Many small to midsize businesses use a handful of Cloud-based applications, such as email or a collaborative tool like Microsoft Teams, but their primary infrastructure remains on-premises.
Cloud migration costs may depend on the service provider, the data and applications you’re migrating, the level of support and security activity you need during the process, and what applications may need to be rebuilt in the Cloud.
You may choose to migrate in phases. It might be that you already have a significant number of applications in the Cloud, or your budget only supports moving a few applications right away.
Expect that you may have to pay for services like an assessment and discovery, during which the provider learns more about your current system to determine how to map it to the new environment. Then, during migration, one of the primary costs is for the labor associated with managing the migration. Your Cloud partner will work to keep your data safe and move functionality over while you’re still operational.
Additionally, your partner may need to reformat, rebuild or even replace specific applications if they aren’t compatible with the new Cloud infrastructure.
When putting together a roadmap for a Cloud migration project, there are three components:
Some workloads are not able to move because of factors like regulatory compliance.
“Moving servers into the Cloud and keeping them running, that’s fairly simple. A more complex migration is an application migration. The most complex implementations are when you re-host or re-implement an application in the Cloud, meaning completely shift out of what you have and probably do a data migration or code migration, meaning you have to rewrite the application, so it’s more Cloud-native.” – Pablo Saez
Once you’re in the Cloud, you’ll pay a monthly subscription cost. The monthly total will depend on which services you need and the applications you’ve deployed to the Cloud that will now fall under the SaaS umbrella.
Naturally, a complete SaaS ERP solution will come at a higher monthly cost than a few applications. You may also have a greater price depending on the size of your infrastructure (how many “servers”), user numbers and storage needs.
Other associated costs include training and educating your team to work with the Cloud applications to ensure user adoption and the highest return on your investment.
However, when you’re calculating the actual cost of the Cloud, you must consider more than just money.
You also need to factor in other ways you can save. Suppose you deduct the expense of these tasks from your cost over several years. In that case, you’ll identify savings: maintaining your infrastructure, such as replacing and updating hardware and software, and the time your IT personnel spend addressing some of these tasks.
You’ll also reap savings from the advances you’re able to make for your business and the efficiencies you gain working in the Cloud. Additionally, consider the impact of increasing or reducing your Cloud usage as needed, never paying for more than you need.
Finally, consider the potential cost of a disruption to your on-premises environment. You may be able to reduce or avoid any issues (and any related costs) altogether by migrating to the Cloud.
“There are two types of benefits. One is the money they save from hosting an infrastructure they have in-house or somewhere else. When you move a solution to the Cloud, the continuity and disaster recovery strategy are usually built into the Cloud offering, something a lot of customers don’t have in their current environment.
The other benefit is business continuity gained. What if there’s a disruption of their business because of weather? Does the infrastructure they have today enable a team in another state to keep operating? If they move to the Cloud, employees working anywhere can jump in and support the whole business. Then they don’t lose that money.” – Dennis Chiu, Sales Solutions Leader, Enavate
When you’re factoring for the total cost of ownership for the Cloud, it’s more effective to analyze over three to five years. In this time, the migration cost will have likely paid for itself, and you will be better able to compare it directly with the costs you incurred while running an on-premises infrastructure.
You will also be able to tally the financial benefits and gains you’ve seen using Cloud applications and infrastructure. In this way, it can seem like a “long game,” but the returns are often well worth it for the level of advancement, reliability and growth companies can achieve post-migration.
Some organizations believe keeping everything in-house gives them a higher level of control and security. However, Cloud environments include high-level security and allow companies to maintain the same level of control without worrying about their servers or data.
When you keep your infrastructure on-premises, you’re on the hook for:
Beyond the tangible expenses related to an on-premises infrastructure, you must account for risks and opportunity costs in your calculations. How disruptive would a power outage be to your business? What are you missing out on when you delay an upgrade? What growth opportunities do you postpone because it’s too difficult to scale your on-premises infrastructure?
A move to the Cloud, incrementally and in phases, can start saving you money and help you immediately realize new opportunities and benefits. Working with Cloud experts who understand the needs of small and midsize businesses can help you maximize your results and avoid missteps along the way.
Reach out to an Enavate team member who can conduct a Cloud discovery call with your team to help you weigh the costs and benefits for your environment, budget and objectives.