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Cost Factors On Migration To The Cloud
ASHISH JAIN, CTO, CALSTRS
CalSTRS’ Technology Services Branch, with over 200 staff, is responsible for operating a portfolio of approximately 135 systems/applications to support the administration of pension benefits for nearly one million benefit recipients and over one billion dollars in benefit payments per month. Nearly two-thirds of the application portfolio is already hosted in third-party data centers, many of which are in varying forms of cloud solutions. CalSTRS embarked on a procurement effort during the past year to obtain a vendor partner to assist with migrating more on-premise applications to a combined operating model of both on-premise systems and cloud services. This effort will achieve CalSTRS’ business objectives of further enhancing business resiliency through continuity, recoverability, scalability, elasticity, and security.
CalSTRS evaluated the pros and cons of multi-vendor versus single vendor deployment. Multi-vendor cloud deployments can lower overall implementation costs but may add an additional layer of complexity and administrative overhead.Since each unique vendor has varying costs for each service, it is possible for collective migration costs to be higher when more vendors are engaged. It is also feasible foran organization to procure one vendor that can directly manage multiple vendors to avoid the burden of managing multiple contracts, business relationships and service-level agreements,and possibly lower the overall cost.Based on CalSTRS’ business requirements and needs, the organization chose to procure one experienced Migration Service Provider to act as the primary contractor for managing and over seeing several other Data Center Providers and Cloud Providers. Additionally, CalSTRS evaluated additional cost factors such as Variable Costs, Fixed Costs, Licensing Costs, Tools Costs, and Labor Costs.
Fixed Costs are mainly derived from Licensing Costs, Tools Costs, Labor Costs, and, whenever applicable, new hardware costs. Some situations may warrant purchasing new hardware to enhance an aging on-premise network infrastructure to achieve adequate connectivity to a new hybrid-cloud datacenter or co-location equipment. A migration effort may also necessitate the use of certain migration tools at an additional cost. If ongoing maintenance and operation (M&O) post-migration is within scope, additional tools may be needed to accommodate changes to IT Service Management (ITSM) and/or IT Asset Management (ITAM) processes that encompass new cloud solutions and services.
If ongoing maintenance and operation (M&O) post-migration is within scope, additional tools may be needed to accommodate changes to IT Service Management (ITSM) and/or IT Asset Management (ITAM) processes that encompass new cloud solutions and services
The two largest cost factors within Fixed Costs are License Costs and Labor Costs. Almost all software requires alicense agreement,some of which are quite restrictive. It is important to determine if any existing licenses have restrictions that may be prohibitive to how the software can be used after a migration, as some licenses may not be transferable between an on-premise system to an equivalent cloud counterpart. It is crucial to pay close attention to license agreements when working with a Migration Service Provider to avoid potential pitfalls such as true ownership, transferability and usage constraints,as some license purchases facilitated by a Migration Service Provider may be restricted to a master service contract with that Migration Service Provider.
Another important cost factor associated with Fixed Costs are Labor Costs, which once again is particularly important when working with a Migration Service Provider. When evaluating Migration Service Providers, it was important for CalSTRS to understand labor costs associated with the migration of an application as a one-time activity and ongoing M&O costs. Hourly rate and an estimated level of effort for each deliverable are two key pieces of information that demonstrate how a labor cost component is derived. Assessing these cost factors enables CalSTRS to accordingly adjust and leverage its own internal resources and talents.
It is critical to understand the various cost factors associated with cloud datacenter migration efforts. Thorough consideration of all cost factors improved the accuracy of CalSTRS’ total estimated migration costs. Understanding how costs are derived and allocated by each cost factor enabled CalSTRS to negotiate more effectively, prioritize the migration scope based on urgency and criticality of CalSTRS business needs, and maximize its budget to optimize fiscal expenditure and best serve the interests of California’s public school educators.
The California State Teachers’ Retirement System (CalSTRS) is the largest educator-only pension fund in the world today, and the second-largest pension fund in the U.S. CalSTRS was established in 1913 to provide retirement benefits to California’s public school educators