It is important to notice that the IT department, by itself, has many different budget needs that must be declared in order to keep the organization healthy. These needs could come in different flavors. Hardware maintenance, Great computation to handle with few resources available or even too little computation with so many resources available. 

Before analyzing the impact, and budget associate with cloud migration, it is necessary to have a clear picture of those bottlenecks. Those factors such as capex, opex and On premises will be considered to IT budget.  Also it depends from enterprise’s previous investments (if they already own a big datacenter)

With that in mind, it becomes easier to evaluate the impacts to be caused in the IT budget.

IT Expenses

Knowing, what is the total cost, the on-premises model, will help to see the impact. Especially, in a long time period. IT expenses are separated to:

1. Capital expenses (CAPEX)
2. Operational expenses (OPEX)

Capital Expenditure (CAPEX) expenses can be divided into multiple assets. Things like hardware, Real Estate , Power Supply (generators – ups), Cables, furniture are all capex. Considering an on premises Data Center CAPEX expenses for maintaining and building an on premises data canter are :

Routers, Switches, Security assets, Load Balancers, Racks, Servers BareMetal, Appliances, Storage (HDD), Backup Systems, Software licenses.

   These easy to calculate assets can include even smaller things like batteries but the big deal is the lifecycle of each asset. Each asset has a lifecycle limitation that has to be determined so old hardware has to be replaced. Old devices also are not energy efficient and may boost energy bills so they better may be replaced before they lifespan. 

Operational or Operating Expenses plays a huge role in the IT budget especially if a new company decides to built their entire computational system on cloud. First of all, in the OPEX we can find hosting expenses Leases, Maintenance and support. OPEX in many countries is preferred by companies (Greece as an example) because it can reduce taxes that a company must pay, by gaining VAT.

After considering all of the above we have to determine the return of investment by the time. A small SoHo company can choose to build an on premises facility or a cloud one. On premises facilities are easy to calculate their costs and you can extend them to cloud whenever you want transforming your model to Hybrid. In the other hand why spending all your budget on capex and hardware that you dont know if will be capable to serve your customers computational needs in the near feature  when you use cloud services that are easily scalable. Also new companies that choose onsite premises are chained to FTEs for supporting them 24×7. Cloud providers include these FTEs but prices may shift from time to time. Shifting to cloud can also be expensive due to lack of updated software assets that running on legacy environments. In this case hybrid model is the best solution.

Existing companies can be benefited from extending their premises to cloud due to elasticity and Operational Expenses. Companies that previously built their Data Centers on their premises can have the full control of their infrastructure including sensitive data and use cloud to extend computational power and non classified data. In this case we can reduce the security point of failure and the cost of fully shifting to cloud. Enterprises can also find easily the cost of their investment by simply using cloud providers’ calculators. 

Considering all of the above, new companies or even big enterprises can save budget from onsite premises (Real Estate, Hardware, Software) by using a Hybrid model or Cloud only model depending of the previous facilities. This IT budget can be used for educational purposes, new FTEs, R&D for new investments for IT’s needs and new technology and finally company IT department may be able to sell their knowledge for cloud to another  enterprises.

This article is a Part of my Master’s final project on Cloud Computing