This is the second post in our series on calculating the total cost of ownership (TCO) in preparation for migrating to the cloud. Read “20 TCO Questions to Ask Before Migrating to the Cloud” here.
A TCO analysis should be at the core of your cloud migration initiative. When business owners understand the true costs of both “before” (on-premises) and “after” (cloud) states of migration, they make better decisions about switching from on-premises to infrastructure as a service (IaaS) and platform as a service (PaaS).
However, calculating TCO is difficult. Business stakeholders don’t trust an analysis that is too simplistic, and organizations struggle to replicate a process that is too complicated.
Here are five reasons cloud migration TCO analyses fail—and how to avoid them.
1. Calculating an accurate TCO can be too time-consuming
It can take months to gather the correct information (e.g., contracts, leases, labor data) and then build up a cost model to calculate the TCO of public and on-premises infrastructure. For some organizations, this can be a project in and of itself.
Any process that takes too long to prepare for—let alone execute—quickly loses momentum. A TCO analysis in preparation for migration needs to be low on manual efforts and high on automation; a high-touch, error-prone process spends more time pulling data than analyzing it.
It’s possible to cut down the time commitment by focusing on the most significant migration pain points. Migrating some of your on-premises apps may not save you much or any money, especially if all their maintenance expenses are paid up through a future date. Focusing on applications and infrastructure that you know have high costs or are maintenance intensive can help save both time and money.
When doing this, however, it’s vital to keep in mind that you won’t have a fully defensible TCO until sometimes outlying and hard-to-find lease and service agreements, as well as any low-priority (legacy, inventoried, low use, etc.) infrastructure, have been accounted for.
Utilizing software like Apptio’s Cloudability Shift to compile your inventory and costs and properly account for cost, deprecation, leases, service agreements, etc. can not only save you the time to establish cost models for these calculations but also provide a more defensible assessment for measuring your current costs as well as benchmarking your migration’s success as it proceeds.
By focusing your assessment priorities on the information available to you and the highest-costing assets, you can more quickly build a justifiable TCO assessment and accelerate your migration through cost savings and proven successes that will build credibility for your team.
2. Assessing a full inventory of infrastructure is extremely complicated
Without a cloud financial management solution to analyze, plan, and track migrations to the public cloud, IT finance and operations teams must eyeball migration costs with ad-hoc spreadsheets and on-the-fly calculations. The output is complicated, error-prone, and indefensible to anyone who isn’t a spreadsheet ninja.
Look to remove needless complexity from your process. Comparing the primarily fixed costs of on-premises IT with the wholly variable costs of cloud is inherently complicated. Don’t amplify that complexity by creating your methodology and developing cost models from scratch. Utilize defensible models or technology that can automate and create accurate, digestible reports to deliver an understanding of your transition from a CapEx to an OpEx model.
3. TCO cost models are often improvised and therefore indefensible
Cloud migration TCO that is complicated to calculate is also complicated to explain. IT finance, and infrastructure and operations teams need to communicate—in non-technical language—the TCO of infrastructure in preparation for cloud migration. Application owners and business units (BU) will not trust migration initiatives if the data underpinning them isn’t understood by anyone outside of IT.
The fastest way to overcome this is to develop a system for analysis with easily digestible and distributable dashboards. Spreadsheets can underpin these dashboards, but business and technology leaders need action-orientated insights that spreadsheets (which are often cumbersome to maintain and difficult to understand) cannot provide alone (e.g., what-if analysis, recommended action, blockers, etc.).
4. TCO assessments too frequently over-simplify costs
Simplification cuts down the time and effort for a cloud migration TCO analysis, but this frequently occurs in exchange for inaccurate assumptions and ineffective allocations (e.g., even-spread allocations are simple to calculate but indefensible for technology leaders looking to align costs to consumption). All too often, resource constraints prevent many organizations from embracing defensible and complicated analyses. Without the right people or enough time, a TCO assessment can ignore the fully burdened costs of underutilized legacy hardware. Such oversimplified cost estimations paint an incomplete picture of the current TCO and burden long-term migration initiatives with incomplete financial assumptions that lead to budget overruns and extend migration timelines.
Organizations must align business value, application owners, and data center locations to investment objectives. This requires a complete account of the costs associated with on-premises IT (e.g., bare metal, network, leases, contracts, and labor costs). Efforts to account for these costs build a more holistic picture for stakeholders, building trust in migration decisions. There is no such thing as one lift-and-shift initiative to move all workloads to the cloud. For many organizations, it’s a multi-year commitment. As migration and cost structures vary by organization, look to factor in monthly or annual costs that also roll into your data center operational expenses. Software that provides a structure and format for workload distributions, unified inventory formats, application ownership, and easily digestible TCO reporting can help simplify and accelerate the consolidation of accurate information for your organization.
5. Limited portfolio views are often provided for TCO assessments
Too frequently, cloud migration TCOs aren’t granular enough to be actionable. As we touched on when discussing how time-consuming assessments can be, organizations cannot prioritize each application migration by business criticality, application, or physical infrastructure use without breaking up the portfolio into discrete workloads. This information is critical to plan a smooth migration and transition to the cloud.
A portfolio view must communicate the capacity of on-premises infrastructure and end-of-life savings resulting from workload migration. If you are looking to migrate workloads from infrastructure that is still in a depreciation cycle, you must capture those ongoing costs too. Paying more for IT post-migration may raise eyebrows from business and finance leaders who only signed off on cloud because “it’s cheaper than our own IT.” Break down your portfolio view of IT to show that “cheaper” means different things by workload.
Cloud migration TCO analysis is the bedrock of your migration strategy. It fails when business and technology leaders do not have the proper support to plan and execute cloud migration.