Calculating the cost of a cloud solution is a crucial step for any project manager looking to migrate their organization’s IT infrastructure to the cloud. But it can be a daunting task, especially for those who are not familiar with the intricacies of cloud computing. In this blog, we’ll provide guidance on how project managers should proceed when calculating the cost of a cloud solution.
Step 1 – Identify Your Needs
The first step in calculating the cost of a cloud solution is to identify your organization’s needs. What are the applications, services, and data that you need to migrate to the cloud? What are your performance requirements, such as response times and availability? What are your security and compliance requirements, such as encryption and data sovereignty?
Answering these questions will help you determine the scope of your cloud solution and the resources that you will need. For example, if you need to run a mission-critical application with high availability requirements, you may need to deploy it in multiple availability zones, which will increase your costs.
Step 2 – Determine Your Cloud Service Model
The second step is to determine the cloud service model that best fits your needs. There are three main cloud service models: Infrastructure as a Service (IaaS), Platform as a Service (PaaS), and Software as a Service (SaaS).
IaaS provides virtual machines, storage, and network resources that you can use to build and run your own applications. PaaS provides a complete development and deployment platform, including operating systems, databases, and middleware. SaaS provides pre-built applications that you can use directly, such as email, CRM, and ERP.
Each service model has different cost structures and cost-saving opportunities. For example, IaaS requires more management and maintenance, but it provides more flexibility and control. PaaS requires less management and maintenance, but it provides less flexibility and control. SaaS requires no management or maintenance, but it provides the least flexibility and control.
Step 3 – Choose Your Cloud Provider
The third step is to choose your cloud provider. There are many cloud providers available, such as Oracle Cloud Infrastructure (OCI), Amazon Web Services (AWS), Microsoft Azure, Google Cloud Platform (GCP), and IBM Cloud. Each provider has different strengths and weaknesses, such as pricing, performance, and features.
When choosing a cloud provider, you should consider your organization’s requirements, such as performance, availability, security, compliance, and geographic location. You should also consider the provider’s pricing model, such as on-demand, reserved, and spot instances, and their pricing calculator tools.
Step 4 – Estimate Your Usage
The fourth step is to estimate your usage of the cloud resources that you need. For example, how many virtual machines, how much storage, and how much network traffic do you need? You should also estimate your usage patterns, such as peak and off-peak hours, and your growth projections, such as the number of users and transactions.
Estimating your usage is crucial for determining your costs, as most cloud providers charge based on usage. You should also consider the provider’s pricing tiers, such as data transfer and storage tiers, and their cost-saving options, such as reserved instances and spot instances.
Step 5 – Calculate Your Costs
The fifth step is to calculate your costs based on your usage estimates and your chosen cloud provider’s pricing model. You should use the provider’s pricing calculator tool to get an accurate estimate of your costs, and you should factor in any additional costs, such as data transfer fees, support fees, and third-party software fees.
It’s important to note that the cost of a cloud solution is not just the cost of the cloud resources themselves. There are also indirect costs, such as migration costs, training costs, and ongoing management costs, that you should consider. You should also consider the opportunity costs of not migrating to the cloud, such as the cost of maintaining legacy hardware and software, and the cost of missing out on cloud-specific benefits, such as scalability and agility.
Step 6 – Identify Potential Cost Savings
The sixth step is to identify potential cost savings in your cloud solution. There are many ways to optimize your costs in the cloud, such as:
- Right-sizing your resources: You should choose the right size and type of resources for your workloads, based on your usage patterns and performance requirements. You should also consider using auto-scaling to adjust your resources dynamically, based on your actual usage.
- Using reserved instances: You should consider using reserved instances to get discounts on your cloud resources, based on your commitment to a certain usage level and term. You should also consider using savings plans, which offer more flexibility than reserved instances.
- Using serverless computing: You should consider using serverless computing to run your code without provisioning or managing servers. This can save you money on idle resources and reduce your management overhead.
- Using data lifecycle management: You should consider using data lifecycle management to automatically move your data to the right storage tier, based on its age and access frequency. This can save you money on storage and reduce your data transfer costs.
Step 7 – Review and Monitor Your Costs
The seventh step is to review and monitor your costs on an ongoing basis. You should regularly review your usage patterns, performance metrics, and cost reports, and adjust your cloud solution accordingly. You should also set up cost alerts and budget alerts, to get notified when your costs exceed a certain threshold.
It’s also important to involve your stakeholders in the cost review and monitoring process, such as your finance department, your IT department, and your business units. You should communicate your costs and cost savings effectively, and get feedback and support from your stakeholders.
Typical Mistakes and Assumptions
When assessing the cost for a cloud computing solution, project managers may make some common mistakes or assumptions, such as:
- Overestimating their usage – Project managers may overestimate their usage of cloud resources, based on their current workload or their growth projections. This can lead to higher costs than necessary, and waste of resources.
- Underestimating their management overhead – Project managers may underestimate their management overhead of cloud resources, especially if they are new to cloud computing. This can lead to higher costs and lower productivity than expected.
- Ignoring their indirect costs – Project managers may ignore their indirect costs of cloud computing, such as migration costs, training costs, and ongoing management costs. This can lead to higher costs and lower ROI than expected.
- Choosing the wrong cloud service model – Project managers may choose the wrong cloud service model for their needs, based on their familiarity or preference. This can lead to higher costs and lower efficiency than necessary.
- Choosing the wrong cloud provider – Project managers may choose the wrong cloud provider for their needs, based on their reputation or pricing. This can lead to lower performance, lower security, and lower compliance than expected.
- Not optimizing their costs – Project managers may not optimize their costs of cloud computing, based on their usage patterns and cost-saving options. This can lead to higher costs and lower competitiveness than necessary.
Remember that calculating the cost of a cloud solution is a complex but essential task for project managers. By following the steps outlined in this article, project managers can identify their needs, determine their cloud service model, choose their cloud provider, estimate their usage, calculate their costs, identify potential cost savings, and review and monitor their costs on an ongoing basis.
Ultimately, the cost of a cloud solution is not the only factor to consider when making a decision. Project managers should also consider other factors, such as performance, security, compliance, availability, and support. They should also involve their stakeholders in the decision-making process, and communicate effectively with them.
Cloud computing has become an integral part of modern IT infrastructure, and project managers need to have a solid understanding of how to calculate the cost of a cloud solution. By following the best practices outlined in this article, project managers can make informed decisions about their cloud solution, optimize their costs, and achieve their business objectives.