In part-one, True North ITG CEO and CISO Matt Murren introduced us to understanding the obstacles many healthcare organizations face in their move to the cloud.
Part-four examines the shortfalls of moving your healthcare IT system to the cloud.
In part-five, Matt discusses the costs involved in moving your healthcare IT to the cloud, including what to include in your budget and how to price out your cloud deployment.
- How Much Does it Cost to Deploy Cloud in Healthcare?
- What Drives the Cost of Healthcare Moving to Cloud?
What Drives the Cost of Healthcare Moving to Cloud?
Budgeting for Cloud Based Healthcare IT
Once you’re at the point where you want to start deploying a cloud system – be it a mix of hybrid or full public cloud – cost is an unbelievably important consideration, especially for a healthcare organization. There are many factors involved when looking at cost.
Could you help us understand the factors influencing the cost of deploying cloud or a hybrid cloud/on-premise system? What are the main drivers of cost for cloud deployment?
What should planners keep in mind? How do these aspects relate to improved outcomes and trade-offs?
Typically, you have to look at whether you want infrastructure as a service or also include the software that allows for servers to be virtualized.
Properly Identify Your Resource Requirements
Within that, it’s a consumption-based model, so you determine the number of processors you need to compute – which are typically measured in GHz – and determine the GB of RAM you need run said server. So each component is priced based on consumption. You also have disk, which is storage of the data, itself charged per GB as well.
You must also consider the bandwidth cost for your environment’s connection, which are also influenced by bandwidth requirements and thresholds that charged by the cloud provider.
Those are typically the area you need for managing the system. If you need to remove physical on-premise hardware, you need a workload conversation for determining what you require to feed a particular application or service.
Public Cloud vs. Private Cloud vs. Hybrid Cloud?
When you step a layer above that, you’re adding services such as managed cloud services, which may include monitoring, patching, caring and feeding the system as well as security and managing security. For that, you won’t look at the security logs, instead, you’ll have a manage cloud provider look at those.
This is when you talk about a managed private cloud or managed cloud. You could have a vendor that’s also managing the cloud for you. So you have to break it up between infrastructure cost as well as the services that stack on that. There are many different offerings of and types of services. Ultimately, it returns to the cost-avoidance or replacement of having someone in your staff or full-time employee managing it versus having that outsourced.
Factoring Out On-Premise Payroll/Employee Costs
So we have the physical infrastructure requirements, RAM, disk space, bandwidth, and software that constitute a shift to cloud. In many cases, you’d need to have that on-premise anyways if you were going to have your system entirely private.
On top of that, you’re essentially trading the on-hand employment cost and the ongoing risk of losing a critical employee (who knows how to manage the system) by outsourcing functions like monitoring and patching and manner security and disaster recovery.
Now, with all this in mind, are we just weighing employee costs and the risk of losing someone who is critical against offloading to a cloud managed services provider? Or are there other things to evaluate as well when deciding to offload to a cloud managed services provider?
Yes. Depending on the size of the organization, you’ll also look at security engineers, database analysts and engineers, network engineers, storage engineers, Citrix or other remote delivery engineers. Those are all very expensive full-time equivalents (FTE). So when we’re talking about consuming services from a managed cloud provider, we’re using those FTEs as you need them incrementally versus having them on your payroll.
Need Insights on How Moving to the Cloud Affects Your Bottom Line?
The Cost of Cloud and Hybrid Cloud Systems
So could you offer a typical cost-estimate or range for maintaining a cloud or even hybrid-cloud and on-premise-based system? What influencing factors drive costs? And how do those affect what to include in your budget?
Typically when we’re talking about infrastructure,
- We’re looking at about $12-15 per GB of RAM, per GHz, per GB for disks, etc.
- In terms of disk space, we’re talking about $0.07 to $0.15 per GB per month.
Those are typically core services, there’s usually more involved beyond that.
Calculating Cost on a Per Person Basis
For instance, when offering managed cloud services at True North, we’ll bundle services with the compute and derive a per user or per seat cost. That’s derived by selecting from ‘a la carte’ based on how many services you want combined with the compute. That gives you a fixed cost per user or per seat.
The benefit to that is that as you move to an operating expense every time you add a new user, from a system perspective. You have a fixed cost on contract that allows you to assess your growth costs and that goes up and down. If you add a user, incrementally it goes up by certain amounts per user, per month.
And, those costs range – depending on selected services – from $35 a month up to $165 a month.
The range is just dependent on how much you want to consume.
The benefit is when you have a reduction of force – let’s say you’re laying-off 50 people – then your cost goes down requisite to the number of employees you’ve removed. Right? So, there are advantages in both cases.
Mitigating Cost Overruns
Summarizing this knowledge for a financial planner at a healthcare organization, we find:
The clear-cut range of $35 to $165 per month, per user would comfortably let them compare and contrast that to their existing cost of having a pure on-prem solution, which includes not only the infrastructure itself but the cost of the employees to service and manage it, the cost of bandwidth, electricity to run those, the ongoing maintenance and security patching, and the downtime that they experience as the result of failures, which can be too common.
So I’m now wondering, how can the decision-maker in the healthcare organization protect or insulate themselves from the cost or the unexpected costs of deploying cloud? There’s certainly more than just the cost per user, per month, no?
Again, it really depends on the services that are contained in that cost. Yes, the workloads are important, but you also have to look at mapping those services and making sure you don’t have redundancies, such as full-time employees mapped to those services.
Thanks Matt. You have definitely given both IT managers and financial planners a lot to think about in terms of the overall cost of deploying cloud and even hybrid cloud for their healthcare organization.
This concludes part-five of our Healthcare Moving to Cloud series. If you’ve decided to migrate your healthcare IT system to the cloud, then contact True North ITG for an accurate assessment of what it’ll cost to move from on-prem to a cloud-based solution that completely aligns with your compliance needs and ROI objectives.