How to save money before taking the first step into the cloud

How to save money before taking the first step into the cloud
Neil Cavanagh is the owner of Xpress Data Systems Ltd. He has over 15 years’ experience as Chief Technical Officer in large organisations in both the public and private sector. Having recently launched CamisOnline, an online Business Administration and Management tool, Neil is actively contributing advice to help businesses thrive on the web.

Cloud hosting can bring many benefits to both small and large businesses, but before you fly into the software sky, it’s always worth looking at the business case before any such move.

Application vendors will no doubt be shortly banging on your door with their options and proposals for hosting your current services in the cloud. Let’s stop to consider a few things before you sign away on any new hosting contacts.

The benefits

There are plenty of benefits for moving to cloud hosting for both your company and the software provider. These will help ease some of the management headache of running, maintaining and upgrading of applications. However, it’s always worth looking at what’s currently going on, how much it costs and what the anticipated savings may be.

Existing contracts

IT costs for the majority of businesses are significant; according to Gartner, IT cost reduction remains a top 5 CIO priority in 2013. In order to understand how IT costs can be reduced, you’ll need to know what these costs are.

Very large organisations that have thousands of applications and systems may have contract management systems that keep records of all their applications, vendors, renewal timescales, associated hardware, contract terms and costs, but it’s relatively easy to get started with a simple spread sheet.

Making an inventory

Start to capture all your application contract details in one place; this could be as simple as storing your contracts in a shared folder and linking to them in a spread sheet. Try to capture:

  • Contract cost
  • Notice/termination period
  • Supplier contact
  • Business area serviced
  • Business area contact
  • Application Roadmap
  • File link to physical contract itself

Application roadmaps

Roadmaps are really important so you know if applications have a future, categorising them into types such as:

Strategic The application has a function for the foreseeable future

Retiring  – Application is in the process of being decommissioned

Retired – The application is no longer required, but may be being kept for archival purposes or occasional access.

Classifying applications into one of these three types will help give you an idea of how many legacy applications that you’re still running. You will likely need help from front-office staff to complete these classifications. There is probably little point in changing or paying for new cloud hosting for applications that will shortly be decommissioned.

Having this data summarised in a spread sheet or contract management database will give you a good idea of where to start looking to make the largest savings.

Hosting costs

The local hosting costs for applications can be very significant when you consider infrastructure requirements such as servers, operating systems and databases. Enterprise database licenses can be one of the most expensive costs associated with application hosting; this article gives an overview of options for reducing licensing costs.

To understand the total costs of hosting an application it’s worth considering:

  • Specialist server and network support costs
  • Server maintenance
  • Backup
  • Licenses (operating systems & databases)
  • Infrastructure services (such as software deployment and management)
  • Datacentre costs

Discovery and software management tools like Microsoft SCOM can automatically search for applications on a company network and map out the dependencies between them.

Realising the true benefits of cloud

Whilst there may be a reduction in individual application license and maintenance costs by moving to Cloud hosting, the true benefits may only be realised when the infrastructure running the existing locally installed applications is decommissioned altogether.

Servers are very powerful pieces of equipment and host many things such as:

  • Other applications
  • File and print
  • Multiple databases
  • Infrastructure components (e.g. Active Directory)
  • Email (such as Microsoft Exchange)
  • Web services

It’s very worthwhile considering the effort and cost to remove legacy systems and turn them off.

Alternative options

There are a number of options available to deal with costly legacy systems that still need to be locally hosted that can help you realise savings in a relatively quick timescale. These include:

  • Consolidation – Move applications and databases onto larger servers to reduce costs and ease datacentre management
  • Virtualisation – By making virtual clones of physical servers, hardware and server running costs can be significantly reduced
  • Data Warehousing – By moving the data out of legacy systems into a database specifically designed for reporting and data retrieval.

The easiest option of the three choices is virtualisation as it involves the least amount of effort; however you still may need to pay supplier application maintenance and license costs if you still use legacy systems.


Cloud hosting can provide some brilliant benefits, but it’s really important to understand the bigger picture and third party costs beyond an individual application itself. This article gives some useful tips on understanding the implications of moving to cloud hosting.

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