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The Economic Framework for Cloud Migration
From a personnel perspective, cost-efficient cloud migration practices aren’t just a technology team challenge alone. Business and financial leaders need to get involved and see the right kinds of cloud cost and usage data that can help start the right kinds of discussions toward making better cloud decisions.
Step 1: Pre-Migration
Begin with an inventory of current resources—you can’t quantify the size and scope of cloud migration without knowing what you are already working with.
If your plan is, in part, to shift the balance of spend towards OpEx and away from CapEx, you need to know what your costs are today. If part of the migration is retiring old and end-of-life infrastructure, it’s important to know where that infrastructure is, and the applications it supports.
This process of baselining is critical for two reasons: first, it helps tell you what the opportunity surface is for the migration. Second, it establishes the baseline from which you’ll measure the success of your cloud migration once you start moving workloads. Without it, you’ll never be able to quantify the business benefit of cloud migration.
The other main outcome at this stage is to understand the key drivers of your migration. Even if you plan to move your entire technology portfolio to the cloud, it won’t happen all at once, and there are shortcuts available to help prioritize which workloads get moved first, particularly from an economic point of view.
These transformation drivers essentially start building the blueprint you can follow to move your business to the cloud naturally. Imagine your data center footprint today—maybe it’s using leased capacity from a colocation firm. If you have a lease ending in the next 24 months, that could be an inflection point that allows you to start shifting that co-located infrastructure to the cloud.
As another example, maybe you’ve got a long-term enterprise-style purchase agreement with a legacy software provider. If part of your migration plan includes reducing your dependence on those providers and adopting new and more modern cloud-native services, an upcoming expiration of that contract could enable you to focus on building a migration plan to move away from those services.
As you conclude this stage, you’ll ideally have two key sets of information. First, you’ll have data on what you have today (and granular total cost information) to create a pre-migration baseline. You’ll also have a roadmap of sorts that illustrates the inflection points in your organization that can drive an initial prioritization effort for your migration. That roadmap maximizes your ability to take advantage of the innovation brought by cloud but minimizes the impact of long term spend duplication.
20 TCO Questions to Ask Before Migrating to the Cloud
The success of your cloud migration depends on your cloud migration TCO analysis—you can’t afford for it to fail. This blog covers questions that look at three areas—on-prem TCO, cloud TCO, and migration costs—to set you up for cloud migration success.
Step 2: Migration business case
When most people think of the economics of cloud migration, this is the phase to which they’re most commonly referring. In fact, many of you have probably already done an exercise like this with a cloud provider (or two).
At this phase, you’ve probably been working with one or more cloud providers for a while and have a sense for their individual strengths and weaknesses. Unlike the first step, where you may have already established a baseline for the business case, you’ll probably do it in conjunction with a cloud provider and often an additional partner. Here you’ll establish the projected benefit of a cloud migration across all three axes—operational, architectural, and economical.
The most persuasive business cases begin with an actuals-based baseline total cost of ownership (TCO). Without an accurate baseline, you’ll be left to substitute estimates based on recommendations from the cloud provider or their partners.
These business cases will usually look at the characteristics of your infrastructure as deployed today—including both configuration data (how many vCPUs, server location, operating system, etc.) as well as performance data (e.g., min/max/average CPU utilization, consumed storage).
The best tools factor this data into sophisticated models developed in conjunction with the leading cloud providers to create a future-state configuration on the cloud of choice. These models usually take into account an optimized configuration—along with pre-purchase commitments, volume discounts, and more advanced Platform-as-a-Service (PaaS), these configurations are the key inputs that enable the public cloud to save customers 30-35% over their on-premises deployments.
Keep in mind that business cases tend to be a point in time snapshot, and may not include a model to showcase the cost of migration over time, the effects of developer transformation, etc. But working closely with many leading cloud providers and SI partners allows us to add this additional context to cloud business case exercises.
At the close of step 2, you’re probably looking at a business case artifact that demonstrates a savings opportunity for your business if you move to the cloud. Hopefully, that business case was developed by comparing the provider’s estimates to highly-accurate on-prem costs from a solution like IBM Cloudability.
If you’re one of those customers that sees potential cost savings in the 30%+ range, you’re probably pretty excited! And for good reason – those cost savings can then be re-invested to support innovation projects. You’ll get the operating leverage associated with the cloud while saving money previously locked up in long-term CapEx commitments.
Now let’s talk about where the rubber meets the road. After you’ve established a business case for moving your organization to the cloud, forecasting the opportunity in cost savings and organizational leverage, the real work is just beginning.
5 Reasons Cloud Migration TCO Analyses Fail
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Step 3: Migrating at scale
After you’ve established a business case for moving your organization to the cloud, forecasting the opportunity in cost savings and organizational leverage, the real work begins.
Think about your overall cloud shift as many smaller movements. Each “mini-migration” validates the right path. The important thing is to get started and learn along the way.
Hopefully, your completion of the business case has shown the opportunity to drive innovation for your business while saving money at the same time. But to capitalize on that opportunity, start migrating workloads to the cloud. To migrate at scale, there are two main sub-components: Build an actionable plan for migration, and measure the value of the migration as time goes on.
In pre-migration, you discover economic inflection points that identify good potential targets for migration. Now that we’re ready to begin moving workloads, the migration roadmap needs to be revisited. How do you decide which infrastructure, applications, and/or services move first? Where do they move? How do they move?
There’s no universal answer to these questions—you’ll want to evaluate your roadmap across a few different dimensions in this phase. This is a sample of the types of drivers that can affect your roadmap and overall migration plan
- Economically driven: Equipment and facility leases, enterprise agreements, infrastructure depreciation, etc.
- Operationally driven: Software and hardware lifecycles, equipment or software instability, workload profiles (low/high risk, dev/test, etc.)
- Capability driven: New business requirements, technical limitations, etc.
- Opportunistically driven: Dev/test workloads, other “low-hanging fruit”
Having a system in place to see your various workloads, organized by these dimensions is critical to prioritizing your migration—and these priorities are fluid. It’s not uncommon to reorganize your migration based on any number of factors and events that unfold over time.
There’s not a single “correct” way to migrate workloads to the cloud. Some of your most valuable services will be factors for refactoring. This process, where an application is optimized to run on a cloud platform, offers great benefits that often result in better performance and scalability at (maybe) a lower price. But that agility and long-term cost savings opportunity may come at a hefty upfront cost to design and architect the new application.
Regardless of how you prioritize your application migration or the method in which you move them to the cloud, it’s crucial that you be able to explain to business partners the value of your cloud migration. Value can mean a lot of things to a lot of people, but, at its core, think about how to communicate why the move to cloud is a good decision for your business. Key indicators of value:
- Are you actually seeing the cost savings you expected from the business case? If you forecasted a 30% cost savings but can measure that you’re actually saving 34%, those additional funds can be invested in accelerating your migration; bringing on additional developers, investing in new tools, etc.
- Can you quantify the operational benefits of the cloud? By outsourcing core infrastructure roles to your cloud provider, most teams see improved application uptime. Measuring that improvement tracked over the migration of key applications is another simple way to showcase the value of the cloud for your business.
- Has the cloud helped you drive innovation into the business? This is one of the most important factors and initially feels hard to measure. One obvious result might be that your developers can now adopt new agile development methodologies to deliver innovation built with cloud-native services. You can use data from those services to track the pace of that innovation through metrics like code commits, quality, release cadence, etc. You’ll likely see that the pace of innovation for cloud-based applications is much faster than their on-premises (on-prem) brethren.
Step 4: Evergreen
Unlike traditional on-prem deployments of infrastructure, legacy middleware, and classic stack-based applications, applications on the cloud enable continuous improvement by optimizing underlying infrastructure.
Optimization is not only enabled but encouraged. After migration, organizations may over-spec the underlying infrastructure for an application that was lifted-and-shifted to a cloud solution. In an on-prem world, such a mistake could have lasting economic penalties—at least for the duration of the depreciation cycle. In the cloud, conditions like that are remedied by simply picking a new instance type and seeing the rate change accordingly.
That kind of optimization is more operational in nature. Other scenarios may be economically-driven. Most providers include different pricing models that reflect the kinds of workloads best suited for them. For example, the AWS Reserved Instance model rewards always-on workloads with discounted pricing via upfront payment. Google’s Preemptible VMs are priced as a low-cost option for workloads that are ephemeral by nature and can be disrupted as needed.
For most teams, this step never really finishes. Workloads evolve, and cloud providers continue building new and innovative services. That churn makes it important to continually iterate on the best way to deliver your services to the stakeholders in your business.
Cloud Migration Success Stories With IBM Cloudability
Liberty Mutual Accelerates Cloud Migration with Apptio
Saved millions in just 15 months.
Accelerated migration with data-driven decision making.
A Modern Approach to Cloud Migration Costs and Planning
Migrating to the cloud is complex, and successful cloud migrations require organizations to adopt a “cloud-smart” mindset, determining when to migrate workloads by focusing on those that maximize the business value while minimizing effort and cost.
Download this e-book to embark on your cloud migration and understand the considerations and steps that are needed to complete a successful migration journey including:
- Understanding your costs
- Developing your migration strategy
- Executing your migration plans
- Preparing for a soft landing in the cloud
- Optimizing cloud costs and operational best practices
