Let’s Get Real: True Costs of Cloud Migration for Your Business

As cloud computing rapidly proliferates enterprise IT, and organizations migrate more of their traditional workloads and on-premise data to the cloud, cloud surely remains one of the fastest-growing segments of IT spend.

It’s true. According to Gartner, more than 45% of IT spending on system infrastructure, application software, business process outsourcing, and infrastructure software will move from traditional IT infrastructures to the cloud by 2024. 

Enterprises are struggling to scale their infrastructure to the insatiable demands. They are adding up costs to hardware procurements, issue software updates, secure infrastructure, train staff, and more. 

On top of that, the ongoing pandemic is holding available human resources, limiting data center facilities, and shrinking hardware supply chains. 

Cloud computing is most certainly bringing much-needed relief.

No doubt, Flexera’s State of the Cloud report indicates that 61 percent of organizations plan to focus on cloud migration this year. However, cloud migration is somewhat more than merely moving your VMs and databases to the cloud. 

There is a crucial need to understand app dependencies, access technical feasibility, and select the best instances to name a few. And then there are post migrations woes as well. 

These challenges translate to added cost and not all of them are conspicuous until very later. To estimate the real cost of cloud migration for your business, you need to take a thoughtful, disciplined approach. The first step is to evaluate your current infrastructure.

The true cost of your current infrastructure

If you don’t know how much your organization is paying for all those servers, software licenses, maintenance contracts, extended warranties, networking equipment, security contracts, advising with your company’s accounting department might ease this task.

You can gather data on network bandwidth, storage, and database capacity, etc. In a typical SME setup with a five-year hardware upgrade cycle, the first-year cost can roughly be up to $50,000 depending on your workload volume and needs:

Server licensing$5,000.00Microsoft Datacenter license for the virtualization hosts
Backup costs$1,900.00
Disk space costs$13,000.00
Infrastructure$3,510.24Networks (data and communication), square footage, Internet, HVAC
Sysadmin Time Costs$3,138.46

In addition to the first year’s costs, there are recurring costs. You may not buy new servers every year but must maintain them. The same goes for all the pieces of hardware and software running your IT infrastructure and resources managing it. Your recurring cost should be anywhere between 10-20% of your first-year cost.

License upkeep:2,985.00 $15% of license costs maintenance per annum (Microsoft, SAN and backup)*
Electricity:420.48 $
Server service contract:2,760.00 $
Sysadmin costs:2,510.77 $
Infrastructure upkeep:1,980.24 $Networking support contracts, HVAC, square footage, Internet
Total:10,656.49 $

However, the true costs of your current IT implementation will be more than direct, administrative, and operating costs. 

Did you know you lose money every time there is the downtime? When British Airways’ power system at a data center failed, the airline lost roughly $68 million in fare refund alone, not to mention a 2.8% dip in their stock prices. 

If your on-premise setup has 98% downtime, then you’re giving up 14 hours of productivity hours every month. Most cloud vendors guarantee a 99.9% availability and compensate for any additional downtime based on your contract. According to a Forbes report, for an hour of downtime, you could be losing thousands of dollars. However, for most SMBs, you could be losing anywhere from $3,000 to $5,000 per month in downtimes.

So roughly, the cost of total ownership of your on-premise setup for three years can be up to $85,000. That is, of course, a rough estimate that entirely depends on the cloud migration plan and strategy that you choose prior to your move.

The true cloud infrastructure cost

So, long story short: once upon a time, it was next to impossible to estimate cloud infrastructure cost up until the actual migration. There was little competition and cloud computing was all about AWS and a little of Google Cloud and Microsoft Azure here and there. Now we have every major tech firm in the cloud business and the competition is at an all-time high.

The pricing of major cloud vendors is still a little too complicated, but most now provide an array of guides and approachable price estimation tools. Every major cloud vendor, along with AWS, offers some form of Total Cost of Ownership (TCO) Calculator, including Google Cloud and Microsoft Azure.

Mostly, it is a simple tool that asks you a few basic hardware questions like your required bandwidth, RAM, processor core, storage, and other factors.

If the tool feels a little arbitrary, then there is an advanced calculator too that asks enough questions to cover your entire infrastructure, with estimations being more accurate.
For the sake of an example, we ran estimations on a TCO tool for AWS, GCE, and Azure respectively, for a typical SME setup consisting of 32 vCPUs and 128 GB RAM:

Cloud Service ProviderMonthly costYearly3 Years
Amazon Web Services$516$6,192$18,576
Google Cloud Engine$453.78$5,445.36$16,336.08
Microsoft Azure$523.28$6,279.36$18,838.08

Cloud offerings from Microsoft, Amazon, and Microsoft are the same in pricing, although Google provides better value over Azure and AWS in this particular example.

Moreover, all these public clouds have vast resources of case studies, pricing sheets, comparative analysis to back your estimation. These resources can act up as a template.

Nevertheless, despite these seemingly high expenses, migrating to the cloud results in being up to 80% less costly than not.

The true cost of moving your data to the cloud

If you’re moving your workload to AWS, for instance, then you may probably have to create an on-demand instance. AWS bills its users for on-demand instances and charges anywhere from $0.018 to $3.30 per hour based on your instance type and size. 

For example, an on-demand t3.large instance goes for 0.146/hour while an r5.4xlarge goes $1.65/ hour. For storage, C4, R4, and R5 have a quota of 100GB, while for T2 and T3, it is 50GB. Beyond the quota, AWS charges $0.115/GB. 

Though data transfer is free within AWS in the same region, AWS charges for data transfer outside the geographical area. That way, the data transfer to t3.large goes for $0.083/hour. For c5.9xlarge, it is $1.53/hour. 

When it comes to Google Cloud, the company bills its users for data storage, network, and operations at the rate of $0.020 per GB for standard storage, $0.12 per GB for data outside the region, and $0.05 per 10,000 operations. Microsoft Azure has a similar billing method for data transfers. 

The true cost of application data synchronization

Perhaps, the workload you’re moving represents a customer-centric application with thousands of simultaneous users at any time of the day. It might therefore happen that the data may not synchronize once being deployed. A lack of data integrity can hence break the app leading to downtimes and negative customer experience. 

When migrating data, ensure smooth synchronization by opting for Multi-AZ deployments, which double the cost of data migration. t3.large that costs 0.146/hour in a single AZ deployment costs $0.292 per hour in multi-AZ deployment. 


It might be extremely overwhelming and confusing to be bombarded with so many figures and stats. But with successful cloud migration, this is a reality businesses have to face when implementing their move.

And that is where Clouve comes into play.

Clouve rids you and your team of the time spent on planning for your move, analyzing quotes, and evaluating ideal cloud providers. We pride ourselves on providing comprehensive support for our clients. Whether it’s selecting a deployment architecture, choosing the right plan, or evaluating your current migration options, our cloud experts have you covered from A to Z.

Get in touch with us today to find out how.