A five-year cost comparison with a bounded migration
A fictional retailer compares two options over five years using an undiscounted classroom model. Replacing its owned infrastructure costs five hundred thousand initially and sixty thousand a year to operate. A cloud proposal costs one hundred thirty thousand a year and requires ninety thousand for migration and integration. The figures are supplied hypothetical totals, not quoted vendor prices. Both options are assumed to meet the same capacity and service requirement for this calculation, but staff training, exit arrangements and the risk of extended parallel running still need review. A sponsor describes the proposal as a saving of one hundred fifty thousand because they compared the five recurring cloud payments with the complete owned-infrastructure total. The team must calculate a consistent comparison and identify what the spreadsheet does not prove.
1. Calculate the five-year totals and saving before other omitted effects.
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Owned infrastructure is 500,000 +5 ×60,000 =800,000. Cloud is 5 ×130,000 +90,000 =740,000. The supplied undiscounted saving is 60,000, not 150,000. A discounted comparison and any omitted costs require additional assumptions.
2. Identify two checks before treating the result as a final approval.
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Verify that both options actually satisfy capacity, recovery and security requirements; check migration effort, parallel operation, training, contract exit and cost uncertainty. A favorable forecast does not prove the workload is technically migratable or that all risk has been priced.