August 23, 2025|7:14 PM
Whether it’s IT operations, cloud migration, or AI-driven innovation – let’s explore how we can support your success.
Cloud migration is no longer a technology fad — it’s a boardroom financial decision. For many organizations, the migration approach you choose determines not only the initial budget but ongoing cloud spend, business agility, and competitive positioning. A careful cloud migration cost analysis helps stakeholders choose between short-term wins and long-term value. This guide will help you navigate the complex decision between lift-and-shift and refactoring approaches.
Organizations move to the cloud for many reasons: cut infrastructure costs, accelerate time-to-market, improve reliability and scalability, or enable new data and analytics capabilities. According to Flexera’s 2024 State of the Cloud report, most enterprises expect cloud spend to grow, making cost control and optimization central to migration strategy.
When deciding between approaches, ask: Do we need speed, or do we need optimization? Are we trying to meet contract expiration deadlines or to rebuild for cloud-native economics? The answers feed directly into cloud migration cost considerations.
Move applications to the cloud with minimal code changes. Quick to execute, less upfront engineering, but often misses cloud-native cost and performance benefits.
Modify application architecture to exploit cloud-native services (microservices, serverless, managed databases). Higher upfront cost and time, but typically yields better long-term TCO, scalability, and agility.
This refactoring vs lift and shift comparison centers on cost, risk, and long-term strategic value. Like choosing between renting a moving truck versus redesigning your home before moving, each approach has distinct financial implications.
If you need a clear economic lens to decide between lift-and-shift vs refactoring costs, this guide is for you.
Lift-and-shift (rehosting) moves an application “as-is” from on-premises or one cloud to another cloud environment. Think of it as moving your furniture from one house to another without changing anything — quick but potentially missing opportunities for improvement.
Common scenarios for lift-and-shift include:
Key lift and shift benefits include:
However, lift-and-shift often translates on the cloud bill into overprovisioned VMs and missed cloud-native efficiencies, increasing ongoing operational costs.
Refactoring changes application design to leverage cloud features (managed services, autoscaling, microservices) without changing external behavior. Similar to renovating a house before moving in — more upfront work but better long-term living conditions.
Refactoring advantages cloud users see:
Choose refactoring when:
Download our free Cloud Migration Strategy Framework to help determine the right approach for your applications.
You don’t have to choose exclusively. Common hybrid approaches include:
These intermediary strategies balance time-to-value and long-term optimization, like renovating your house room by room while living in it.
| Cost Factor | Lift-and-Shift | Refactoring |
| Engineering Labor | Lower: primarily migration tasks | Higher: redesign + implementation |
| Migration Tools | VM migration or backup/restore | Development tools + migration tools |
| Downtime Risk | Moderate, can be minimized | Can be lower with proper planning |
| Project Timeline | Shorter (weeks to months) | Longer (months to years) |
| Example Range (Single App) | $40k–$100k | $150k–$500k+ |
Lift-and-shift often leads to:
Refactoring typically results in:
“In our experience, well-executed refactoring can reduce monthly cloud spend by 30-50% compared to lift-and-shift, but you need to factor in the higher upfront investment to calculate true ROI.”
Hidden costs that are easy to overlook in your cloud migration cost analysis:
Lift-and-shift preserves existing technical debt, potentially causing future remediation costs. Refactoring addresses technical debt upfront but requires more initial investment.
Some legacy licenses don’t transfer to cloud environments or cost more. Cloud-native services in refactoring may reduce licensing costs but require new expertise.
DevOps practices, SRE teams, and cloud governance require training and process changes. Refactoring typically requires more extensive retraining but builds valuable cloud skills.
Large data volumes can increase egress and transfer costs if not planned properly. Refactoring can optimize data flows but requires careful architecture planning.
A mature cloud migration cost analysis includes both direct and indirect costs in TCO (Total Cost of Ownership) modeling.
“Choose the fastest path that doesn’t saddle you with long-term cost or architectural debt. Sometimes that’s lift-and-shift, sometimes it’s refactoring, and often it’s a thoughtful hybrid approach.”
If your immediate goal is to reduce physical datacenter costs or meet contractual deadlines, lift-and-shift can deliver quick time-to-value. If your strategic goal is to accelerate product delivery, gain elasticity, and enable cloud-native capabilities, refactoring is generally better despite longer initial timelines.
Think of it like moving to a new city: renting immediately (lift-and-shift) gets you there faster, but building a custom home (refactoring) creates a better long-term living situation. Your business priorities determine which approach makes more sense.
A practical model should include:
Sample structure for your cloud migration cost analysis spreadsheet:
Key metrics to calculate in your cloud migration cost analysis:
All costs over a chosen lifecycle (3–5 years typical), including initial migration, ongoing cloud costs, operational expenses, and maintenance.
Calculated as (Benefits – Costs) / Costs, where benefits include cost savings and revenue uplift from improved capabilities.
Time required to recover the upfront investment through ongoing savings or increased revenue, typically measured in months or years.
Includes all costs over the application’s expected lifetime, including future upgrades, scaling requirements, and eventual replacement.
Example calculation (simplified):
“`python
# Simple payback period calculation for refactoring
upfront_refactor_cost = 300000
monthly_cost_rehosted = 35000
monthly_cost_refactored = 25000
monthly_savings = monthly_cost_rehosted – monthly_cost_refactored
annual_savings = monthly_savings * 12
payback_years = upfront_refactor_cost / annual_savings
print(f”Monthly savings: ${monthly_savings}”)
print(f”Annual savings: ${annual_savings}”)
print(f”Payback period (years): {payback_years:.2f}”)
# Output:
# Monthly savings: $10000
# Annual savings: $120000
# Payback period (years): 2.50
“`
Run scenarios with different assumptions to test the robustness of your cloud migration cost analysis:
Use sensitivity analysis to test variables such as:
Consider a hybrid approach when:
Phased refactoring tactics:
Cost control tactics for your cloud migration:
Situation: Data center lease ending; monolithic order system runs on 20 VMs.
Option A (Lift-and-Shift): Move VMs to cloud as-is. Upfront cost $60k. Ongoing: $18k/month.
Option B (Refactor): Break order system into microservices, use managed DB, and serverless checkout. Upfront: $280k. Ongoing: $9k/month.
Break-even calculation: (280k-60k) / (18k-9k) = 22.2 months → ~1.9 years
Decision: Given 3-year horizon, refactor yielded lower TCO and better performance.
Constraint: Strict compliance requirements and complex licensing costs.
Approach: Hybrid strategy – rehost lower-risk workloads; refactor customer-facing apps with dedicated security patterns.
Result: Short-term cost saved through selective rehosting; long-term agility improved with targeted refactoring on prioritized components.
Key learning: Application-specific approach based on business value and compliance requirements yielded optimal results.
These simplified calculations demonstrate how to weigh immediate budget constraints against multi-year savings and strategic benefits in your cloud migration cost analysis.
When conducting your cloud migration cost analysis, remember these key points:
For more practical guidance on cloud migration cost analysis, explore these resources:
