IDG Contributor Network: Why we’re still talking about TCO, but for the cloud


In the late 1980s, Gartner popularized the term “total cost of ownership” (TCO) to define the long-term cost of maintenance in addition to the upfront price of an enterprise technology. Microsoft began using TCO as a key metric to show that although an open-source alternative, Linux, was free to adopt, it could lead to higher costs as more deeply skilled teams would need to manage and troubleshoot Linux over the long term.

Fast forward 30 years—our technology is more advanced and accessible, but TCO remains frustrating and unclear, even as software has largely moved from complex licenses to metered cloud services. The dollar amounts provided by mainstream cloud vendors for compute, storage, and other cloud-based services rarely provide customers with clarity about the full cost of running business applications in the cloud.

This is particularly true when considering migrating legacy applications to public clouds. What’s the TCO of a highly complex but still mission-critical application that runs on premises (with manual updates and maintenance), and how does that compare to its total cost running that application in a public cloud (including the costs to rebuild for cloud and migrate it there)? Here’s why it’s important to understand TCO in this scenario.

As cloud adoption enters its second decade, many organizations have stopped looking at their datacenter as the default and have instead adopted a cloud-first mentality. The problem is that no two applications are alike. While the first decade of cloud was driven by new application development in, for, and tailored to the cloud’s characteristics, customers are now trying to gain the same agility and scale benefits they’ve experienced with cloud-native applications for the legacy systems running their businesses. Unfortunately, many of these customers end up with unanticipated and massive bills for cloud migration, professional services, ongoing maintenance and unpredictable usage.

for their needs.

Assessing your applications’ workload requirements is the critical first step in gaining control over cloud TCO. Set aside category conversations about hybrid versus public versus private. Tune out vendor hype or pressure to standardize on a single solution. You know your applications and your team best. Only you truly understand what your business needs. Establish and communicate these priorities with clarity and conviction. From there, begin to assess cloud services for three characteristics:

  1. Predictability: How will the service handle your unique workload demands? What upfront migration costs exist and how well can you estimate future billing?
  2. Flexibility: Can the cloud service adjust to unique application dependencies, or is it one-size-fits-all? Are there multiple services available you can combine to best support your applications? 
  3. Control: How much visibility do you have into usage? Do you have full transparency and granular control over use? Can you quickly react to user data to adjust spend accordingly? 

The bottom line for cloud TCO is that it’s not about cloud at all. It’s about your business and the applications your business depends on to stay competitive. It’s about starting with what you know—workload demands and business objectives—then investigating multiple cloud services to find the best approach for your needs. The best solution will be one that meets you where you are today and takes you where you need to be tomorrow, not one that forces you to change overnight. Be willing to use a multicloud approach that gives you predictability, flexibility, and control across your entire application portfolio. The process will take time and won’t always be straightforward, but by committing to your business needs first, you’ll be in the best position to understand, control, and minimize cloud TCO over the long term.

This article is published as part of the IDG Contributor Network.