Evaluating Costs of a Hybrid Cloud Environment

In order to make a smart economic choice about running workloads in your internal data center versus implementing a public, private, or hybrid cloud environment, you need to understand some of the subtleties of the cost factors. You also need to consider potential hidden costs associated with the cloud and, in particular, a hybrid cloud.

There’s always a cost to change to a hybrid cloud environment. These costs may include

  • Management: Management of a hybrid environment brings additional challenges. You no longer simply manage the data center, or even one cloud, but instead must manage multiple environments — on-premises, in your private cloud, and on one, if not multiple, public clouds. People, processes, and software can help with management, but they each have their own costs involved.

  • Data transfer: When you transfer data, say from your premises to an application in a public cloud, costs are involved. This includes the fee to initially move your data to the cloud. These costs can quickly mount if you have a lot of data. Furthermore, depending on your cloud vendor, you can incur networking fees when moving data between different virtual machines within the same cloud (for instance, during backup or replication).

  • Customization costs: If you’re migrating an application to the public cloud that was on-premises, there may be costs associated with customizing the application so that it can now work in the hybrid environment. Most likely, some configuration work and testing will be done first. In addition, that application may not be well designed for the highly distributed nature of the cloud environment in its current form, and it may need to be rewritten.

  • Integration costs: In a hybrid model, you will probably want to integrate various applications. For example, your off-premises CRM application might integrate with your on-premises business intelligence application. Sure, you might have to integrate them if they were both on-premises, but it will probably take you more time to figure it out in a hybrid model.

  • Storage costs: As you move data and workloads to a hybrid cloud, you will really have to balance and think about your long-term storage costs. Likewise, you must plan on how much storage a growing data volume might cost in the cloud.

  • Platform costs: In some situations, you need to maintain the licenses for technologies such as middleware when you move to the cloud (because most companies end up having a hybrid).

  • Software maintenance costs (package software): This cost may be difficult to calculate if the software license is tied to processor pricing, and the situation could be further complicated if the specific software license is part of a bundled deal or a global usage deal.

  • Compliance costs. Compliance (external or internal) can be an increased cost when using the cloud. It may be necessary to have the cloud service audited to see that it meets the appropriate requirements, which may relate to IT security or recovery procedures or any other such IT activity that must obey compliance standards. This is in addition to your existing on-premises audits. Compliance requirements might come from several sources:

    • Vendors and partners: An example would be credit card companies requiring companies who accept credit cards to comply with the Payment Card Industry Data Security Standard (PCI DSS).

    • Customers: Customers may require that you produce an SSA 16 or similar report to prove various compliance requirements.

    • Governmental bodies: Your organization may need to comply with local, national, or international compliance standards. These include Health Insurance Portability and Accountability Act (HIPAA), and Sarbanes-Oxley (SOX), along with dozens of others.

    • Internal compliance: Your organization may have established its own compliance requirements. These may be even more specific than externally required compliance.

  • Server costs: If an application is relatively small, running in a virtual server, or perhaps only running occasionally, it’s unlikely that moving it to the public cloud will result in any server hardware savings.

  • Storage costs: Similarly, if very little storage is consumed by the application, there may be no reduction in SAN costs.

  • Data center infrastructure costs: The floor space in the data center will not be reduced by the removal of a few servers, and it may make little difference to cooling costs. The change usually needs to be significant in order to bring down these costs.

  • Operational support personnel costs: Savings occur here only if there’s a possibility of saving the cost of a staff person or delaying the recruitment of another person.

  • Infrastructure software costs: Infrastructure management software costs may not come down with the movement of a few workloads into the cloud.

You need to have a policy on what must stay in the traditional data center or in a private cloud and why (for example, privacy and complexity and singularity of the workload). You should have a policy that states that automation and self-provisioning will support the business and enable it to react quickly to opportunities. There also needs to be a policy that specifies when a workload can safely be moved to a public cloud — and whether the data is safe enough in the private cloud. All these questions are part of the larger economic decision-making process.

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