Cloud Migration: The Financial Basics

Cloud hosting provides businesses clear advantages over conventional in-house on-premises hosting, from secure access to email, servers and data to around-the-clock support to 99.9% uptime and enhanced employee productivity. If those benefits aren’t enough to convince decision makers that cloud migration is a wise move, the proof of cost savings and a basic understanding of cloud migration economics will. Read on to see how you could be saving.

Cloud hosting provides businesses clear advantages over conventional in-house on-premises hosting.

From remote and secure access to email, servers and data, to around-the-clock support, to 99.9% uptime and enhanced employee productivity, businesses get immediate and real benefits by moving their computing to the cloud.

But what about the cost?

If the above benefits aren’t enough to convince decision makers that cloud migration is a wise move, the proof of cost savings and a basic understanding of cloud migration economics will.  


Why in-house hosting is hurting your bottom line

From expensive server purchases to ongoing software license and maintenance fees, traditional IT infrastructure is a very costly (and, occasionally, unpredictable) capital expense that can drag on your organization’s balance sheet.

In a recent independent cost-analysis study commissioned by mindSHIFT, 59% of respondents surveyed from a variety of businesses and backgrounds said they are actively trying to cut IT costs and are focusing on reducing costly hardware and software.

Most organizations see cutting IT costs as a priority, and using the cloud helps remove costly capital expenses and turn shared computing into a predictable monthly expense.

Among those who considered cutting costs a priority, hardware and maintenance were key areas of focus for savings.

Moving to the cloud directly targets the primary areas where businesses want to see savings: hardware and hardware maintenance costs and software support contracts.

But less than half of respondents considered datacenter electricity and HVAC (42%) or rent/facilities (22%) as an IT cost. And only 60% considered staff headcount an IT cost, likely underrepresenting the real cost of on-premises vs. cloud environments.

Most IT budgets under-represent shared business costs like rent/facilities and headcount. The real savings is potentially higher than most organizations understand.

How the cloud saves money

Cloud technology shifts expenses from capital to operational costs. By migrating to the cloud, companies are replacing large and costly capital expenditures—build out, servers, hardware, software and maintenance expenses related to in-house hosting—with tax-deductible operational costs.

You can think of the cloud model as being similar to that of leasing a car. You are responsible for your usage as opposed to the total cost of ownership.

Businesses large and small that cloud compute are reaping the cost-savings by eliminating in-house storage and migrating their servers and software to cloud-based technology.

Companies with the majority of their infrastructure in the cloud report the largest savings, some directly related to eliminating depreciation and upfront costs once associated with capital purchases like hardware or software. Other cost savings are attributed to electricity and cooling costs, as well as costs associated with manpower, consultants and vendors, formerly associated with on-premises infrastructure, now replaced with cloud-based technology.

Firms with a high 67%+ of their server infrastructure workload in the cloud save over 40%, an annual cost savings of nearly $30,000.

Firms with a high 67%+ of their server infrastructure workload in the cloud save over 40%, an annual cost savings of nearly $30,000.

When should you migrate to the cloud

When migrating to the cloud, it’s important to understand you can migrate as much as you’re comfortable with right away, or gradually, if you prefer. The biggest savings are realized when you go all in, but understandably many organizations prefer to wait until it’s time to upgrade their infrastructure.

Organizations migrating less than 1/3 of their email workload to the cloud save on average over $17,500 annually. Those that migrate more than 2/3 of their email workload save over $71,000.

Migrating databases and infrastructure to the cloud saves your organization even more.

Organizations that migrate 2/3 of their database workload to the cloud are saving over $40,000 annually, and those that migrate more than 2/3 of their infrastructure to the cloud, save around $26,000 annually.

So when should my organization migrate into the cloud?

Contact us to connect with one of our experts today, and learn how your IT team can quickly start saving your organization money while improving operational efficiency.