Cloud migration: Costs and value balancing act

Dec. 8, 2023 / By Rajesh Srivastava

Despite the compelling value proposition of cloud adoption, there is still hesitancy from some organizations due to concerns about potential cost. Notably, this perception is more pronounced within the core technical community and managerial ranks than among senior IT management. When comparing the costs of cloud adoption to on-premises solutions, it is essential to transcend the expenses related to servers/virtualization, storage, backup and network costs. 

This perspective is not meant to counter the notion that on-premises is cheaper, but rather to offer a broader outlook on the comprehensive requirements for providing end-to-end IT services. IT infrastructure constitutes only one facet of IT services, with an efficient management and business application layer being equally critical. Therefore, when deciding between on-premises and cloud computing, it is prudent to strike a balance between the cost of infrastructure and the overall value provided in terms of end-to-end service delivery. 

The decision to choose to run workloads on-premises versus in the cloud is not a competition of two methodologies, but should be seen as a collaborative approach to get the best of both worlds. Year-over-year industry data and surveys have shown the acceleration of cloud adoption mainly due to overall value proposition and inherent benefits. A Forrester survey on the cloud shows, “More than 70 percent of healthcare organizations surveyed by Forrester reported using multiple public clouds.” 

While local, on-premises resources excel in aligning with the organization’s needs, the assumption that an organization can internally handle everything independently and run it efficiently proves to be complex and challenging to demonstrate. On the contrary, a synergy of organizational skills with cutting-edge and mature cloud services provides a combination that harnesses the best of both worlds. 

Senior management usually accepts both the value proposition of cloud computing and the limitations of a do-it-yourself approach. Here are a few examples of top challenges from a recent Becker’s CIO survey: 

• “For the fourth straight year, talent strain topped HIT operational obstacles. Nearly half of health care CIOs reported, “retaining and budgeting for qualified IT resources,” as their greatest (44 percent) operational challenge related to IT.” 
• “While contending with higher resource costs and ongoing financial pressure, health IT leaders seek additional cost saving strategies.” 
• Concerns related to IT service failures (i.e. system downtimes or cybersecurity hits) 

Having a cloud adoption strategy embedded into an organization’s goals can alleviate most of these pain points for better value realization. The Business Value of Migration to Amazon Cloud Services is a Hackett Group white paper examining more than 1,000 organizations with cloud infrastructure in place. While the individual results might vary, the study illustrates the following results: 

• 54 percent reduction in outages 
• 45 percent decrease in security-related incidents 
• 43 percent decrease in time to market for new application features or functionality 
• 66 percent increase in administrator productivity 
• 29 percent increase in staff focuses on innovation 
• 20 percent reduction in total technology infrastructure costs  

The above-mentioned study is one of several resources available when considering the narrative of cost effectiveness and operational efficiency (i.e., we can do it cheaper, we can run it better).  

The value proposition, supported by relevant data, is widely accessible for meaningful comparisons. Unfortunately, organizations still grapple with accurately measuring the complete cost of running on-premises systems (which extends beyond the cost of servers and virtual machines) and establishing key performance indicators (KPIs) for do-it-yourself strategies. 

Conversely, the realignment of on-premises expertise toward innovation and business support, coupled with strategic cloud partnerships, has proven to be the optimal approach. This strategy not only addresses the current challenges outlined in the aforementioned survey, but also future-proofs the IT posture, aligning with the evolving needs as more CIOs strive to tackle these issues. 

Gartner’s inclusion of “Industry Cloud Platforms” as a priority in the “Top 10 Strategic Technology Trends for 2024” provides insight into the necessary steps to prepare for upcoming developments. Therefore, it is imperative to future-proof and align IT strategy with cloud adoption sooner rather than later to get ready for what lies ahead. 

Rajesh Srivastava, CISA, CGEIT, CRISC, PMP, cloud product manager at 3M Health Information Systems.