Business Owner requires spending to provision the cloud resources, configure it and operate it. Total Cost of Ownership (TCO) includes all costs including provisioning and operating cloud workload in addition to other costs like licensing, labour cost etc. Cloud computing offers lower TCO bringing saving to business. There are following line items in calculating the TCO for rolling out any cloud applications.
CapEx
Known as Capital Expenditure. It represents the establishment cost or initial setup cost born by organization upfront. Capex cost includes – compute capacity-servers, storage, database servers, networking equipment etc. Organizations can start developing apps immediately without doing an upfront huge investment for infra resources procurement. This CapEx cost is lower for cloud computing as compared to traditional IT systems as cloud providers provisions the infrastructure – ready with a click and available in cheaper rate for economy at scale principle for cloud users.
OpEx
Known as Operational Expenditure. It refers to cost of operating and maintaining the cloud environment or applications or services. This is recurring cost charged as pay-as-you-go pricing model based on the resources usage rate. It includes support, maintenance, security, training, education, development, and integration cost etc. This OpEx cost is lower for cloud computing as compared to traditional IT systems as cloud providers manage and maintain the infrastructure.
Labor Cost
Labor cost is less in cloud computing as the infrastructure is managed by cloud service providers whereas in traditional data centre management, organizations require to lot of IT personnel to manage the servers and their operations.
License Cost
Licensing cost can be reduced moving servers, Databases into cloud. For example - MS SQL Server or Oracle DB or MS Windows Server license cost can be reduced after moving into cloud.
3.2 Cloud Cost Reduction Approaches
Right Sizing Infrastructure
It means provisioning resources to match workloads. Right sizing is one of the key factors to lower the cloud cost. Many organizations do lift and shift during migration without much thinking on the cost to keep performance on priority – results some oversized instances with lot of wasted or unused resources, later it is optimized considering the actual workload and balance the compute, storage, and database etc. resource capacity.
To know more about Right Sizing. Please read here - Righ Sizing
Automation
Automation is future of cost reduction. Use automated way to identify the cost-efficient instances for the desired workload.
Auto-scale the cloud resources to handle the sudden change in demand.
Identify unused resources automated way and remove them automatically.
Reduce effort in Compliance
In traditional data centre environments, compliance reporting is manual to verify asset configuration, reporting on administrative activities etc. Cloud provider offers many embedded tools to generate reporting for such compliance validation. AWS offers automated tools like AWS Security Hub, AWS Config and AWS CloudTrail for validating compliance. These tools save time reducing manual effort on such routine automated reporting or auditing tasks.
Leverage managed services
Utilize manages services where applicable as cloud providers provide many embedded services and benefits for managed services which can save time, cost and effort and application team can focus on the business functionalities, the core of the business. For example, AWS has – RDS, ECS, EKS, DynamoDB etc.