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Cloud migrations often -- but not always -- reduce app TCO

With high hopes for reducing TCO, many enterprises migrate apps to the cloud. But, depending on the app, those cost reductions aren't always in the cards.

Greater flexibility, agility and scale often top the many reasons companies move applications to the cloud -- but reducing TCO and management costs is almost always the end goal.

Most organizations assume the bulk of their TCO savings will come from the reduced hardware costs from moving to the cloud. But many overlook the massive value -- and financial gain -- in cloud automation, according to Robert Mahowald, program vice president, SaaS and cloud software at IDC.

When an organization migrates an app to the cloud, it frees up the precious IT resources and staff that managed it.

"There is a cost swap out, and then the retirement of the physical assets, but then there's [the benefit of] doing less and having more automation so you can put fewer people on that job," Mahowald said. "That's important."

Novitex Enterprise Solutions, a provider of cloud-based document outsourcing services, agreed. In 2013, the Stamford, Conn.-based company started to migrate some of its document lifecycle management applications to IBM SoftLayer. As a result, the overall TCO for those applications has shrunk significantly, said Novitex CIO Vanessa Lapins.

"It's hard for me to quantify if its five heads or 50 heads, but I definitely know I would need a lot more resources and a lot more boots on the ground [if we hadn't moved to the cloud]," Lapins said.

"Now, we can focus on strategy, we can focus on client solutions and that's where we can put our mindshare," she said. "The total cost of ownership overall is much lower."

While the cost savings from cloud can be significant, it's important to remember that not all enterprise apps are created equal. And, as a result, not all will reap the same financial benefit from cloud.

Mobile, "bursty" apps get biggest cloud return

Before migrating applications to the cloud, categorize them into one of three groups: ideal for cloud, a potential candidate for cloud, and those that should remain on-premises, according to David Hoff, co-founder and CTO of Cloud Sherpas, a cloud advisory and services provider based in Atlanta.

If you can't prove a return in advance, it's probably something that should stay where it is.
David Hoffco-founder and CTO of Cloud Sherpas

Those in the first category -- applications that are ideal for cloud -- tend to see the greatest financial return from a cloud migration. They also tend to see that return more quickly than the apps in the other two groups, Hoff said.

So, what distinguishes these cloud-friendly apps from the rest? For starters, Hoff explained, they're "bursty," meaning they experience irregular peaks in demand. E-commerce apps, for example, will see a burst of activity around the holidays. Even simpler, internal applications, such as those hosting corporate meeting minutes, experience bursts in demand for short periods of time.

These applications reap the greatest benefit from cloud features such as autoscaling, where compute resources are automatically spun up or down, depending on usage.

"It's an amazing use of cloud resources, because you are getting the capability to handle that huge request, but you aren't paying a penalty for the other 364 days of the year it's sitting idle," Hoff said.

Bursty applications also include those supporting digital ad campaigns and those used for big data and high-performance computing, said Kris Bliesner, co-founder and CTO of 2nd Watch, a cloud consultancy in Liberty Lake, Wash.

"Where the need for computing resources is high, but only during a certain period of time -- those are fantastic workloads for getting great, great ROI," Bliesner said.

2nd Watch clients tend to see cost savings on the "low end" -- between 30% and 40% -- after moving those workloads to AWS, a 2nd Watch partner, Bliesner said. Clients see cost savings from cloud as quickly as the first month, especially if the move eliminated the need for a major capital expense. For others, savings are accumulated more slowly, over the course of three to five years.

Like bursty applications, mobile applications usually run more cost-efficiently in the cloud, Hoff said. In addition to also experiencing inconsistent spikes in traffic, mobile applications can benefit immensely from the global data center footprint of a cloud provider like AWS or Google. These legions of data centers, Hoff said, allow mobile applications to scale more quickly, while maintaining high performance levels for users around the globe.

While bursty and mobile applications see significant gains from cloud, not all applications will. Both Bliesner and Hoff noted that applications tied tightly to legacy enterprise hardware -- such as earlier versions of an Oracle database -- might not be a good candidate for cloud. In fact, if the hardware on which these applications run has already yielded a financial return, an organization might incur costs -- not reduce them -- by moving that application to the cloud.

"Porting a workload and getting it into the cloud is not trivial, because of all the dependencies," Hoff said. "And if you can't prove a return in advance, it's probably something that should stay where it is."

Hoff noted that cloud migration costs for simple, standalone apps can be under $1,000, but can easily exceed 10X to 20X that cost for more complex applications. Automation, scale and complexity all influence these costs, he said.

Beware of cloud's hidden costs

While moving applications to the cloud is generally cost-effective, it can also introduce hidden, or at least unexpected, costs. Those related to bandwidth and cloud management are most common, Bliesner said.

Novitex's Lapins urged other organizations to be especially cognizant of the extra network bandwidth needed to move data in and out of the cloud.

"Definitely have an investment in the network," Lapins said. "It's really critical. We did a lot of pre-planning and took it as an opportunity to revisit really almost all of our data lines to be able to get the best price."

Luckily, there are tools that can help manage and track cloud costs. AWS, for instance, provides its own cloud billing and cost reporting tool. 2nd Watch, along with other third-party providers, offers tools for keeping tabs on cloud usage and expenditures.

"We continue to spend a lot of time with our customers, helping them understand how the business model and the consumption model are different in the cloud," Bliesner said.

Kristin Knapp is site editor for SearchCloudComputing. Contact her at kknapp@techtarget.com or follow @kknapp86 on Twitter.

Next Steps

Determining your company's cloud TCO

What to know before migrating applications to the cloud

This was last published in March 2015

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Has moving applications to the cloud impacted your organization's TCO and management costs?
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Moving applications to the cloud for us has seen a significant reduction on TCO and management costs. This is particularly with regards to power consumption which has been cut by more than half. The miner cost involved could be in re-programming applications to take advantage of the various positives of the cloud platform but this has not had any significant increase in the costs of operating business. In a nutshell, the move has cut costs.
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Cloud technologies have blanketed the IT industry in recent years. While truly innovative across the board, certain apps may fare better with traditional storage servers.
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