Running IT-as-a-Service Part 50: Hybrid Cloud migration – Where is the money saving?
Conclusion: External Cloud services can realise cost reduction up to 50 % p. a. and promise no set-up or exit fees. While the ongoing cost reduction is realistic, there are significant other costs related to third-party services that should be considered to calculate the overall cost saving of Cloud migration. They are:
- Transition-in cost due to the use of external consulting services to set up the new environment (up to $2.5 million for 7,000 users), as well as procurement cost to prepare tenders, select vendors and negotiate contracts (up to $300,000)
- Transition-out fees to migrate the current service to another service provider (similar to transition-in cost)
- Hardware depreciation related to private Cloud exit
- Governance fees to ensure Cloud consumption remains within budget and the desired service levels are tracked and met (up to 7 % of the annual cost)
- Risk mitigation strategies to ensure the Cloud service remains secure.
The purpose of this research note is to provide a step-by-step approach to determine the ongoing cost-saving opportunities needed for Cloud migration business case1 preparation.