Describe an analysis of alternatives (AoA)

  • 3 minutes

Some agencies require the completion of an Analysis of Alternatives (AoA) as part of the business case analysis process. An Analysis of Alternatives is when you perform a comparative analysis of different cloud offerings. It allows you to down-select to the primary potential solutions.

Tip

An Analysis of Alternatives (AoA) is a great way to determine which U.S. Sovereign Cloud environment is best suited for your workload(s).

Analysis of Alternatives grid.

Key financial measures

Analysis of Alternatives grid, highlighting financial grid.

An Analysis of Alternatives also allows you to address both financial and non-financial measures across different solutions.

Net Present Value represents the difference between the current value of cash inflow and the current value of cash outflows over a period of time. It's used to plan the profitability of a project or investment.

Break Even represents the period of time or amount of revenue that must be collected to cover the fixed and variable costs of production.

Benefit Cost Ratio represents a ratio used to summarize the relationship between the relative costs and benefits of a proposed project. It's either expressed monetarily or qualitatively. Generally, a benefit cost ratio (BCR) over 1.0 indicates that the effort will deliver a positive value.

Return on Investment represents a value used to evaluate either the efficiency or profitability of an investment, or to compare the efficiency or profitability of an investment against alternatives. Return on investment (ROI) attempts to evaluate the value an investment provides relative to the cost of the investment.

Cost represents the calculated financial value of an alternative, and is typically expressed over a period of time, such as over multiple fiscal years. Cost includes both capital expenses and operational expenses. With US Sovereign Clouds, almost all costs are operational expenses versus on-premises workload deployments that include capital expenditures.

Unfunded Cost, as it relates to operating in government environments, represents the amount of money not being provided to meet a requirement or mandate. For example, an Executive Order may mandate that a Government Agency converts all systems to meet a specific protocol, and could provide all agencies $10 million to do so. If the total cost of meeting the requirements of the Executive Order is $25 million, the unfunded cost is $15 million, or the difference between the total cost and the funded cost.

Savings represents the amount of money that will be saved or the costs that will be avoided by selecting a specific alternative.

Considerations

There are numerous factors that should be considered whether determining both financial and non-financial metrics.

Financial run cost

When it comes to determining the actual run cost, consider:

  • The total cost of ownership (TCO) comparison of run costs on a cloud service provider platform after migration, versus the current operating model
  • The impact of both different purchasing and pricing options, such as reserved instances, Azure Hybrid Use Benefit, Enterprise and CSP agreements, and volume discounts
  • The impact of discounts, such as service credits, the Azure AMP program, and other offerings

Financial migration or innovation costs

Many customers will migrate, while some will innovate their cloud workloads.

Microsoft provides no charge resources (the Customer Success Unit) to help customers to determine whether it’s best to migrate a workload or modernize it.

Compelling events, such as the need to jettison aging equipment, will oftentimes push customers to modernize.

Additionally, change management, like establishment of a Cloud Center of Excellence, governance, and operations model, may incur additional costs. Microsoft provides no charge resources and programs to address change management needs through the Customer Success Unit.

Productivity gains

While it’s easy to jump to what Sovereign Clouds may cost, you should also be sure to quantify financial productivity gains:

  • Estimate the reduction in number of hours spent conducting compliance activities that are handled by Microsoft through the use of accredited environments
  • Quantify the productivity gains from services that are deployed and updated for you
  • Estimate the productivity gains to be made by Administrators and Developers through the use of Sovereign Cloud environments

Business or mission gains

Finally, financially quantify the business or mission gains (value to the agency, war fighter, or citizen):

  • Estimate how using US Sovereign Clouds will provide agility, meaning faster time to deploy, flexibility to scale up/scale down, reorganization, global expansion
  • Estimate how using US Sovereign Clouds will help provide cost avoidance, such as server refreshes, maintenance contracts, and other operational expenditures
  • Quantify how using US Sovereign Clouds will help to mitigate risk, such as resilience for disaster recovery or performance
  • Finally estimate how using US Sovereign Clouds will assist in reducing decommissioned assets or single use hardware

Importance

While it's not always required, performing an Analysis of Alternatives (AoA) can provide a holistic picture of financial measures, financial run costs, migration and innovation costs, productivity gains, and business and mission gains that are part of a digital transformation journey.

By enumerating these considerations, you may benefit in helping to determine which cloud environment best suits your workload.