Grounded in the Cloud
cancel
Showing results for 
Search instead for 
Did you mean: 

In-depth comparative TCO analysis–when is it necessary?

LalitS

 

In the fifth part of this Hybrid Cloud Economics blog series, I reviewed the simple formula that 451 Research created to help you derive your own simple total-cost-of-ownership (TCO) comparison between a private cloud and a public cloud. In this part, I’ll review why and when an in-depth TCO analysis may be necessary.

While a quick TCO can help validate general assumptions early on, a more detailed TCO analysis may be more appropriate for situations where an enterprise needs cost-specific data to help set long-term strategy and make detailed decisions specific to workload placement. A deep comparative TCO analysis requires significant expertise and tools in order to produce proper results for informed decision-making.

When is an in-depth analysis necessary?

Getting a complete view of all the elements specific to a contemplated change is required to achieve a sound economic decision. An in-depth TCO analysis that addresses the specific needs of the enterprise helps achieve this. For instance, an in-depth approach is appropriate when:

  • workload-specific insight is required
  • enterprise criteria such as risk, security, compliance, or performance are crucial to the decision
  • if a large transformation or investment is in development
  • if a need to redesign an application deployment strategy is being considered

What factors into an in-depth analysis

Let’s start with costs that need to be included in the overall TCO estimate. These are any existing costs that the enterprise has already committed to paying toward its IT infrastructure. For example, there may be contractual commitments on a data center with five years remaining on the lease. There may also be undepreciated equipment that is inappropriate to a new service approach. Maintenance contracts, SLAs, disaster recovery, redundancy, regulatory compliance, personnel, and software are all big cost factors in major IT decisions.

Next, as I discussed in an earlier blog, migrating an existing business application from traditional IT to a private or public cloud service requires developing a business case that includes more than just cost factors. Considering other key business factors is extremely important. Factors like data location, data sovereignty, privacy, risk, agility, time-to-market, and performance are significant considerations within an in-depth analysis. A detailed analysis that looks at the overall effect to the business can shift decision priorities from cost to overall value as the primary criteria.

There are many variables to consider. The business needs to take the necessary time to understand which elements matter the most based on their specific scenario and prepare to come up with a detailed comparative view.

An in-depth analysis factors in elements such as business outcomes and timeframes that must be met, contractual obligations, financial commitments, staffing capabilities, application architecture, infrastructure dependencies, organization standards, geographic dependencies and other requirements. A priority focus needs to be put on regulatory, confidentiality, and security requirements that will have a major risk impact to the overall business. Such analysis will include detailed quotes from hardware and software vendors for upfront costs including hardware, software, installation, setup, and configuration. Cost estimates will also be required for ongoing operating expenses, including annual software licensing, data center space, power, network bandwidth, maintenance, support, and management. A detailed analysis needs to make assumptions of the salary and other associated manpower benefits, including the office space needed for administration. In addition to current costs, future costs and contingent costs must also be factored in for all of the same upfront components—hardware, software, power, labor, and facilities.

What to expect

An in-depth approach takes time, effort, tools, and resources to complete, so organizations need to allow for the time required to complete the analysis and to make sure they have the skills on hand to do it properly. Certain investment levels or unique business scenarios will dictate the need to complete this level of analysis. Knowing the comparative and relative costs of private, public, and managed cloud options is can help make the right business decisions. As the number of variables increase, getting comparative costs becomes more and more complicated to obtain. That’s the bad news. The good news is there are many resources and tools that can help.

HPE Technology Services offers multiple levels of assistance in helping businesses assess their needs and the cost/value of different options. For customers who need to transform their operating model to support hybrid IT, the HPE Strategic Roadmap Service begins with the required outcome and takes a holistic view of the transformation needed, including the economic impact.

For customers needing to move a set of workloads to a cloud platform, HPE Workload Portability Services starts with discovery, then analyzes the suitability of the workloads using advanced tools that consider many factors, including cost, and finally determines the best targets for migration. Automated migration and optimization services complete the task. 

In the next part to this series, as we look into other topics related to hybrid cloud economics, I’ll review the differences between using proprietary software stacks in public cloud services versus OpenStack distributions in self-managed private clouds.

Other recommended resources:

For more information and resources on how to create a quick comparative multi-cloud TCO, explore the 451 Research paper, How to Create a Quick Comparative Multi-Cloud TCO Analysis Spanning Public, Private and Managed Cloud.

Read the next blog in the Cloud Economics 101 series: Private Clouds – Cost Considerations of Proprietary vs OpenStack® Distributions

  • HPE Cloud
About the Author

LalitS

I am the Chief Operating Officer and Vice President of the Hewlett Packard Enterprise cloud business unit, driving all aspects of operations and performance. I am a leader in HPE’s Cloud Economics campaign. I have also held various leadership roles in General Electric and Electronic Data Systems, and have a Master’s degree in Business Administration, Analytical Finance and Strategic Marketing from the Indian School of Business, Hyderabad in India. I am also Six Sigma Black Belt certified. Follow me on Twitter @lalitsingh17

Events
28-30 November
Madrid, Spain
Discover 2017 Madrid
Join us for Hewlett Packard Enterprise Discover 2017 Madrid, taking place 28-30 November at the Feria de Madrid Convention Center
Read more
See posts for dates
Online
HPE Webinars - 2017
Find out about this year's live broadcasts and on-demand webinars.
Read more
View all