Cost Benefit Analysis is the framework to evaluate whether benefits from migration to cloud will outperform the costs assosciated with it. This analysis can enable organizations from taking sustainable business decisions in terms of digital transformations whereas align them to their goals along their transformation journey.
Cost benefit analysis, as the name suggests, is a factor or majorly costs and benefits during a cloud migration. In the below steps, we will learn how to break down costs and benefits, assign monetory values to it, and, identify whether an organization should pursue it or not.
1. Identify Costs
In order to assess the success of any
1.1 Initial Costs:
- Assessment and Planning Costs
- Migration Costs
- Training Costs
1.2 Operational Costs
- Subsciption Costs
- Support Costs
- Maintenance Costs
- Management Costs
1.3 Hidden Costs
- Downtime costs
- Compliant Costs
- Vendor Lock-In
2. Identify Benefits
2.1 Direct Financial Benifits
- Cost Savings
- Scalability
- Disaster Recovery & Backup
2.2 Indirect Financial Benefits
- Increased Effciency
- Innovation and Agility
- Performance Improvement
2.3 Strategic Benefits
- Flexibility and Mobility
- Business Continuity
- Security Enhancements
3. Quantify Costs and Benefits
3.1 Assign Monetary Values
- Direct Costs
- Indirect Costs
- Direct Benefits
- Indirect Benefits
3.2 Use a time horizon
- Time Frame
- Discount Rate
4. Analyze Results
4.1 Net Present Value : Benefits – Costs
4.2 Return on Investments (ROI) = (Net Benefit – 100) / Total Costs
4.3 Payback Period
5. Sensitivity Analysis
5.1 Identify Key Variables: Things that could impact costs and benefits
5.2 Conduct Scenario Analysis: Results in the best case, or worst case or in the most likely case
6. Make Recommendations
6.1 Summarize Findings
6.2 Provide Recommendations
