How to cut costs by switching to the cloud

Christian Krause05/27/2020

Many small and medium-sized businesses hesitate to start running their IT infrastructure and application landscapes more efficiently in the cloud. One reason is the concern that operating costs could get out of control. Yet, if you get the main things right, the result is noticeable cost-savings and a big step towards digitalization.

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The promises made by cloud providers were initially met with disillusion, since the predicted cost-savings could not always be achieved with the first generation of cloud applications. Today we know: potential savings depend primarily on consistent administration and continuous controlling of cloud resources. All the same, we now have handy tools that allow us to

•    automatically and accurately track costs in the cloud and 
•    continuously control resources, in some cases even down to the hour. 

In addition to holding high potential for innovation, these are key reasons for the success of the cloud. Analysts at the Gartner market research institute estimate that by 2025, about 80% of companies around the world will have shut down their data centers.

A paradigm shift with respect to IT

In the public cloud, “pay per use” billing has come to the fore. That’s why it’s important to have a clear understanding of what you actually need. When put before practically unlimited resources, the onus is on the company’s management not to act like they were at an all-you-can-eat buffet. Instead, they should closely examine the actual use profiles of each resource. Based on the experience of cloud specialists, companies often book 50–60% more resources than they actually need.

So, it takes some serious rethinking. With the in-house data center, resources were always planned to handle peak loads, plus a buffer to take care of all the hardware procurement processes. In the cloud environment, this approach doesn't work. Instead, you start with the most crucially needed resources, because you can easily add more in a matter of minutes. This flexibility is probably the biggest advantage of the cloud. No one is forced to maintain hardware all year round just so they can stay afloat when the Christmas rush hits. And this aspect is also advantageous in other areas. When capacity is not needed – for instance, at night or on weekends – it can be “switched off” temporarily.

Using data analysis to save resources

COSMO CONSULT experts have also gained good experience in analyzing telemetry data of consumption in order to identify areas where savings can be made. Most importantly, though, every cloud transition project must be preceded by a solid assessment phase in which we define the appropriate IT workloads for each step of the migration process. Taking a purely lift & shift approach in which applications and data are moved to the cloud without any adjustment will not help reduce costs. Savings can only be achieved if systems are modified such that cloud-native advantages can actually be utilized. It’s equally important to know the pricing and price dynamics of your cloud provider. The goal is to find a service provider that not only offers the right functionality but a good bargain, too. 

It may make sense to reserve essential resources for a year or more, given that generous, double-digit discounts are often available. It’s also smart to always keep an eye on pricing, since resources and services often become cheaper over time. At that point, it might be more cost-effective to switch. It’s also a good idea to take a close look at the likely older databases your company is using. Moving these to the cloud can often require purchasing expensive licenses. To cut costs, you might want to switch to a database-as-a-service solution like Azure SQL.

Cloud storage means greater sustainability

The cloud is also a good option for geo-redundancy. Business are no longer forced to run a costly second data center location in order to achieve this goal. 

And cloud providers generally take the lead when it comes to sustainability. For example, modern data centers have a PUE (power usage efficiency) rating of about 1.3. That means that IT takes up 100 KW; the remaining 30 KW goes to heating and cooling. Older data centers can hit PUEs of 2 or even higher. So, their surrounding equipment consumes at least as much power as IT itself. The business model of cloud providers is based on utilizing server capacity as efficiently as possible while using the latest in energy-efficient technology. And the electricity cost-savings get passed down to the customer, too.

Want to know how your business can safely take advantage of the cloud? 
Sign up now for our free webinar “Why now is the best time to take your IT infrastructure to the Microsoft Cloud!” , Thursday 25th of June at 11 am. We will tell you what a professional migration concept should look like and which processes to transfer to the cloud first. 

Don't have time? 

Our white paper “The Key to a successful Cloud Migration” is a good place to start. Here you will find out, when it is worth starting, how to do it cost-effectively and much more. 

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Christian Krause
Operations Manager, Cloud & IT Services