Enterprise Strategy Group | Getting to the bigger truth.

ESG Economic Validation

The Economic Value of Migrating On-premises SQL

Server Instances to Microsoft Azure SQL Solutions
By Aviv Kaufmann, Senior Validation Analyst; and James Garrett, Consulting Analyst
October, 2020

Executive Summary
Organizations have relied on Microsoft SQL Server to successfully
power operations, applications, and business intelligence for decades.
These companies have invested significant time and resources in
training, developing, and integrating with other systems. In order to
maximize the utility of their data, organizations need to be able to
spend less time managing their databases and more time realizing the
value provided by them. On-premises databases can be costly to
deploy, manage, maintain, and scale. For this reason, many have
looked to the cloud to help modernize applications and operations.
The agility offered by the cloud is undeniable, but some may delay
decisions as they struggle to weigh uncertainties and risks around comparing technologies, dealing with licenses, and
making a change.
ESG validated that by moving on-premises SQL Server to the Microsoft Azure SQL family of cloud databases,
organizations have realized significant savings and benefits with minimal impact to operations, while extending the
value of purchased licenses and investments in training and development. ESG’s modeled scenarios, based on
validation with real world customers, predict that organizations can save up to 47% when migrating their database
from on-premises deployments to Microsoft SQL Server on Azure Virtual Machines (Infrastructure-as-a-Service or IaaS).
The modeled organization can further lower costs for modernized cloud-ready applications by an additional 17% with
Azure SQL Managed Instance and Azure SQL Database (Platform-as-a-Service or PaaS) while speeding the development
and delivery of revenue-generating applications, resulting in an expected increase in revenue of $30M.

© 2020 by The Enterprise Strategy Group, Inc. All Rights Reserved.

This ESG Economic Validation was commissioned by Microsoft and is distributed under license from ESG.
 Economic Validation: The Economic Value of Migrating On-premises SQL Server Instances to Microsoft Azure SQL Solutions 2

Introduction
This ESG Economic Validation focused on the quantitative and qualitative benefits organizations can expect from migrating
on-premises SQL Server instances to SQL Server on Azure VMs (IaaS) and Azure SQL Managed Instance or Azure SQL
Database (PaaS solutions). Using a multi-step scenario analysis, ESG quantified the incremental cost savings of each
migration step along the process.

Challenges
On-premises infrastructure has powered SQL Server deployments for legacy applications for some time but may prove to
be a barrier for organizations’ ability to be flexible and scale when looking to develop, deploy, and operate modern
applications. On-premises infrastructure forces IT decision makers to predict the compute, storage, and network needs of
the organization, locking them into that decision for the long term. The need to over-provision resources to meet peak
demand also requires a large upfront capital investment. Compared to modern alternatives, on-premises infrastructure is
slow to deploy and complex to manage and maintain. Planning and scaling infrastructure is difficult, requiring the same
planning, justification, procurement, and deployment processes and effort each time the organization grows beyond its
current capabilities or deploys new applications.

In today’s fast-changing business environment, organizations need to adapt to new market dynamics quickly (sometimes
unexpectedly, as we’ve experienced with recent events). ESG research shows that a significant number of organizations are
considering replacing their on-premises infrastructure with public cloud services as a result of the COVID-19 experience.1

Figure 1. Top Five Future Actions for Addressing On-premises Data Center Challenges Post-COVID-19
Pandemic
Which of the following future actions do you believe your organization might take when it
comes to your on-premises data centers based on the COVID-19 experience?
(Percent of respondents, N=488, multiple responses accepted, top 5 responses)

Use more public cloud services (to replace data center

40%
infrastructure)

Use more remote monitoring/management technology to

39%
manage our data center infrastructure

Implementing a “software-defined data center” strategy 38%

Use more managed services for operations and monitoring 34%

Use containers and other modern application elements to

make apps more portable across multiple clouds (whether 32%
our data centers or public cloud providers)
Source: Enterprise Strategy Group

When organizations are slowed down by legacy on-premises infrastructure, they are slower to react to market changes and
may even be slower to modernize their entire business. Remote access to on-premises infrastructure also raises security
concerns that these resources will not be able to be updated and protected with the latest technology. IT administrators
face the difficult task of managing on-premises infrastructure as efficiently as possible while minimizing the costs.

1 Source: ESG Research Report, The Impact of the COVID-19 Pandemic on Remote Work, 2020 IT Spending, and Future Tech Strategies, June 2020.
© 2020 by The Enterprise Strategy Group, Inc. All Rights Reserved.
 Economic Validation: The Economic Value of Migrating On-premises SQL Server Instances to Microsoft Azure SQL Solutions 3

Balancing these two criteria is a skill unto itself, but there also are a variety of specialized deployment and management
skills that IT staff currently possess that may not transfer to the next generation of technology. Finally, there is a shortage
of qualified skilled labor to administer on-premises technologies.

The Solution: Microsoft Azure SQL

Azure SQL is a family of fully managed, secure, and intelligent SQL cloud database services that support a wide range of
application patterns, from re-hosting and modernizing existing SQL Server workloads to modern cloud application
development. Azure SQL enables organizations to run SQL Server workloads on Azure’s infrastructure-as-a-service (IaaS)
offering or a platform-as-a-service (PaaS) offering, depending on which business and application requirements are right for
them.

SQL Server on Azure Virtual Machines (VMs) is categorized as IaaS because the SQL Server is run inside a VM in Azure.
Customers maintain complete SQL Server compatibility and operating system-level access. SQL Server on Azure Virtual
Machines is best for lift-and-shift scenarios or when operating system-level access is necessary.

Azure SQL Managed Instance is a combination of the broadest SQL Server database engine compatibility with all the
benefits of a fully managed platform as a service for modernizing existing applications and migrating them to the cloud.

Azure SQL Database is optimized for supporting modern cloud-based applications. Serverless compute and Hyperscale
storage options automatically scale resources on demand, so you can focus on building new applications without worrying
about storage size or resource management. Azure SQL Managed Instance and Azure SQL Database are characterized as
PaaS-hosted services that eliminate the need to manage the database engine and enable organizations to migrate their on-
premises SQL Server infrastructure onto a SQL Server in Azure cloud.

Figure 2. The Economic Value of Migrating On-premises SQL Server Instances to Azure SQL Cloud Database
Services

Source: Enterprise Strategy Group

Organizations that migrate their databases can seamlessly move first from on-premises deployment to SQL Server on Azure
Virtual Machines and save up to 55% off pay-as-you-go rates, use reservation pricing to commit to 1- or 3-year terms to
save up to 80%, and take advantage of special Dev/Test pricing to save up to 55% for non-production scenarios.

© 2020 by The Enterprise Strategy Group, Inc. All Rights Reserved.

 Economic Validation: The Economic Value of Migrating On-premises SQL Server Instances to Microsoft Azure SQL Solutions 4

ESG Economic Validation

ESG completed a quantitative economic analysis around the process of migrating on-premises SQL Server to SQL Server on
Azure VMs, Azure SQL Managed Instance, and Azure SQL Database solutions. ESG’s Economic Validation process is a
proven method for understanding, validating, quantifying, and modeling the economic value propositions of a product or
solution. The process leverages ESG’s core competencies in market and industry analysis, forward-looking research, and
technical/economic validation. ESG conducted in-depth interviews with end-users to better understand and quantify how
Microsoft Azure SQL has impacted their organizations, particularly in comparison with previously deployed and/or
experienced solutions. In addition to having experience with on-premises SQL Server database solutions, some of the
customers interviewed had migrated their environments to Azure SQL and were able to give detailed feedback on ongoing
administration differences between the cloud solutions. The qualitative and quantitative findings were used as the basis
for a multi-scenario economic model comparing the expected costs of on-premises and cloud-based Azure SQL services.

Microsoft Azure SQL Economic Overview

ESG’s economic analysis revealed that organizations have been able to save money, operate more efficiently, and improve
business agility by migrating their on-premises SQL instances to Azure VMs. Additionally, ESG found that incremental
benefits were realized when organizations migrated modernized instances and development efforts from SQL Server on
Azure VMs to Azure SQL Managed Instance and Azure SQL Database. In both scenarios, ESG determined that the Azure SQL
family of products provided its customers with significant savings and benefits in the following categories:

• Operational efficiency and savings – Azure SQL offerings significantly reduced the amount of time spent by business
decision makers, systems administrators, database administrators, developers, and dev/ops teams by eliminating the
need to manage infrastructure and platforms and perform maintenance tasks, and by adding automated functions to
further reduce administrative burden.

• Improved business agility – Perhaps the largest benefit reported by customers was the increased business agility
achieved by migrating their SQL deployments to Azure. Workloads can easily be scaled up, scaled back, or moved to
alternative offerings to seamlessly meet the changing demands of today’s business with optimal levels of
performance, availability, and functionality.

• Elimination of hardware and software – Migrating on-premises infrastructure to Microsoft Azure VMs enables
organizations to eliminate the need to purchase, deploy, manage, and maintain networking, storage, and server
hardware and software. Additionally, organizations can extend the benefits by not needing to purchase, manage, and
update hypervisors, operating systems, SQL Server instances, and runtime environments when they move from SQL
Server on Azure VMs to Azure SQL Managed Instance and Azure SQL Database.

Operational Efficiency and Savings

Azure SQL customers told ESG that they were able to realize significant operational savings of 40-60% by migrating from
on-premises infrastructure. By eliminating tasks like planning, deploying, maintaining, troubleshooting, and optimizing
their on-premises infrastructure, customers have saved both time and money with Azure SQL.

• Simplified planning, purchasing, and deployment – Customers told ESG that by migrating workloads to Azure, they
significantly reduced the amount of time they spend planning, justifying, procuring, and licensing new hardware
and software when required for expansion or net-new deployments. In addition, deployment and provisioning of
new resources was far quicker on Azure, allowing IT decision makers and systems admins to make resources
available sooner and focus more of their time on other initiatives. In addition, Azure SQL Database automatically
© 2020 by The Enterprise Strategy Group, Inc. All Rights Reserved.
 Economic Validation: The Economic Value of Migrating On-premises SQL Server Instances to Microsoft Azure SQL Solutions 5

allocates compute and storage as needed to completely eliminate the need to worry about managing resource
requirements.

• Simplified maintenance – Azure SQL customers reported significant time savings by simplifying or eliminating the
need to update and patch systems, test releases for interoperability, or perform routine maintenance. The need
to update and maintain server, network, and storage components was completely eliminated and Azure VM’s
automated features dramatically simplified patching,
backup, security updates, and storage configurations.
Additionally, for those leveraging Azure SQL Managed “Patching VMs is major work when you
Instance and Azure SQL Database solutions, systems
have thousands of them… we don’t
admins no longer had to worry about patching or
updating the operating system and SQL Server version, want to waste our highly paid technical
yet could be assured they were always running on the resources to patch infrastructure, so not
latest up-to-date platform with evergreen SQL. having to do that was a big benefit of
• Simplified daily administration – By eliminating Azure SQL.”
hardware, organizations were able to minimize the
number of interfaces systems and database
administrators use to deal with many of the daily administration tasks through improved automation and
integration with Azure services, making tasks like backup, recovery, DR, security, and user-related tasks easier to
accomplish. Moving to fully managed PaaS solutions like Azure SQL Managed Instance and Azure SQL Database
eliminated many daily administration tasks completely.

• Improved visibility and security – ESG learned that Azure

SQL customers felt they had better visibility into their SQL
“Engineers love to build software – deployments through a unified dashboard, and no longer had
to spend time monitoring, reporting, and cross-referencing
nobody wants to go patch VMs or information across multiple interfaces. Users also reported that
upgrade databases and infrastructure. security and compliance were improved with Azure. Azure SQL
Azure lets them focus on what they do has intelligent Advanced Threat Protection, part of Azure
best.” Defender for SQL, that remediates potential threats in real
time, gives proactive vulnerability alerts, and has built-in
security controls, as well as comprehensive compliance
coverage.

• Less time spent troubleshooting, balancing, and tuning – By eliminating hardware and software from multiple
vendors, end-users spend far less time troubleshooting issues and dealing with support delivered from multiple
vendors. In addition, most Azure customers reported that once they migrated their databases into the cloud, they
experienced noticeably improved performance and workload stability. Azure SQL Managed Instance and Azure
SQL Database offerings further saved end-users the burden of configuring and tuning the database and operating
system for peak performance and availability through AI and machine learning-based automatic tuning behind the
scenes.

© 2020 by The Enterprise Strategy Group, Inc. All Rights Reserved.

 Economic Validation: The Economic Value of Migrating On-premises SQL Server Instances to Microsoft Azure SQL Solutions 6

Improved Business Agility

ESG learned that Azure SQL customers were able to transform operations and became more agile and better able to
respond to changes in their businesses once they migrated their databases to the Azure cloud. Customers said that cloud
migration was seamless, and they instantly noticed performance and availability improvements, and enjoyed the resource
flexibility that the cloud provided them.

• Fast and seamless migration – Customers reported that they were able to migrate their existing applications and
databases to Azure SQL VMs quickly, easily, securely, and seamlessly. There was no need to learn new tools or
languages. Customers were able to continue using their existing licenses and benefited from deeply discounted
pricing through the Azure Hybrid Benefit. Free Azure assessment and migration tools such as Azure Migrate and
Azure Database Migration Service made planning and migration easy, and customers were able to simultaneously
run on-premises and in the cloud to test until they were ready to make the switch.

• Ability to grow/shrink as needed – Customers told ESG

that they were far better equipped to respond to the
“Business teams used to have to ask
needs of their business after migration to Azure SQL. They if IT can handle the load if we get
were now able to spin up new instances quickly and more business… with the added
address new business opportunities months earlier than
agility of Azure there is no question
they could have with on-premises deployment.
Furthermore, customers who deployed SQL Server on anymore... you just have to go get
Azure Virtual Machines were able to shut down resources more business.”
when they were not being used to save money, and
benefited from Azure Advisor cost management, which analyzed the environment and sent recommendations on
ways to lower their monthly bills.

• Cost-effectively handle bursts on demand – One customer we spoke with was able to take great advantage of the
ability to spin up instances when needed and shut them down when not required to handle a very bursty seasonal
workload, saving millions of dollars versus having to overprovision on-premises resources for a worst case
scenario. Azure SQL Database serverless is also a great way to deploy new applications with unknown usage
patterns and resource requirements as resources used by the service are only billed if used.

• Improved customer satisfaction – Service provider organizations stated that their customers instantly noticed the
improvements in the services they were receiving and were able to tier new and improved levels of products to
offer their customers that best fit their needs. Other organizations reported an immediate reduction in the
number of support requests received for supported applications.

• Simplified consolidation and upgrades – Some organizations

“We were able to consolidate 7
that had built up many SQL instances over time, from
different platforms, each with their different business units or functions or through mergers and
own expertise and languages, into acquisitions, reported that the migration to Azure SQL
a single unified platform.” proved to be an opportunity to consolidate, eliminate, or
modernize redundant or aging instances to the latest
versions of SQL Server.

• Reduction in risk to the organization – Customers reported that they were better able to sleep at night not having
to worry about hardware failures, HA/DR configurations, manual errors, backups, or security and compliance

© 2020 by The Enterprise Strategy Group, Inc. All Rights Reserved.

 Economic Validation: The Economic Value of Migrating On-premises SQL Server Instances to Microsoft Azure SQL Solutions 7

issues. Azure removed the burden of risk from the IT teams and gave customers peace of mind through features
like Always On availability groups, flexible HA/DR options, automatic security updates, free extended support for
legacy offerings, and automated backup and recovery.

• Integration with Azure Services – By migrating SQL workloads to Azure, organizations were in a better position to
integrate SQL operations with the entire Azure and partner ecosystem. This further increased the operational
agility of the organization, shortened product development and solution enhancement times, and enabled
possible future endeavors that would have been far more difficult to achieve on-premises.

Elimination of Hardware and Software

ESG learned from Azure SQL customers that they were able to eliminate significant amounts of hardware and software by
migrating their on-premises infrastructure to the cloud. Customers benefited from the upfront cost savings of avoiding
capital spending on hardware and software refreshes and licenses. They also saved time and money when they didn’t have
to operate and maintain on-premises infrastructure. Finally, Azure customers only pay for the resources they use, so there
was no need to overprovision.

• No hardware or software to purchase or refresh – ESG found that customers who migrated to Azure VMs no
longer had to spend time or money on planning, deploying, and maintaining networking, storage, and server
hardware and were able to eliminate some of the cost of
virtualization software and backup solutions. Furthermore, “We were looking at a refresh of
ESG learned that customers who then migrated from Azure
our on-premises infrastructure, and
VMs to Azure SQL Managed Instance and Azure SQL Database
were able to save themselves from having to purchase for us this was logically the right
operating system and database licenses, middleware, time to try Azure VMs with little risk
management tools, and runtime system tools. – we could always go back if
• Reuse of software licenses – Customers were able to extend needed – but from that point we
the value of their investment by transferring Windows Server never looked back to on-premises.”
and SQL Server licenses covered under Software Assurance to
Azure VMs, Azure SQL Managed Instance, and Azure SQL Database. In doing so, they were also eligible to receive
significant savings of 80% or more on the cost of compute instances through the Azure Hybrid Benefit.

• No hardware to manage – Lifting and shifting workloads to SQL Server in an Azure Virtual Machine freed up IT
administrators from having to manage physical on-premises infrastructure while allowing them to continue to
leverage existing knowledge of Microsoft environments and learn modern and marketable cloud skills. Moving
from Azure VMs to Azure SQL Managed Instance and Azure SQL Database completely eliminated the need to
manage virtual infrastructure, operating systems, and databases, streamlining workflows for developers and
allowing expert IT resources to focus on other areas of the business. In both instances, ESG found that growing
organizations could perform existing and new functions around their SQL database with less experienced, more
generalized, and lower cost IT admins when compared with the specialized expertise required to manage the
growing complexity of on-premises infrastructure.

• No upfront costs – ESG found that when organizations considered Azure SQL in their capital budgeting decisions,
they benefited by avoiding the major upfront capital costs required by on-premises infrastructure. By migrating to
Azure SQL and transferring a large capital outlay to an ongoing operating expense, organizations were able to
fund higher returning projects earlier in the cycle than if they had to buy on-premises hardware.

© 2020 by The Enterprise Strategy Group, Inc. All Rights Reserved.

 Economic Validation: The Economic Value of Migrating On-premises SQL Server Instances to Microsoft Azure SQL Solutions 8

• No ongoing maintenance costs – After migrating to Azure SQL and eliminating on-premises hardware and
software, customers told ESG that they no longer had to pay for ongoing support and maintenance contracts to
multiple vendors. In addition, organizations eliminated all professional services costs required to maintain the
hardware. Extended support and maintenance contracts get significantly more expensive once hardware and
software becomes 3 years old, so organizations benefited from forgoing that expense as well.

“This move represents a re- • Reduction in data center operational costs – ESG found
that customers who moved their systems to Azure SQL
architecting of platforms that just solutions and eliminated hardware reported significant
grew over time not because it was savings by no longer having to pay the ongoing cost of
the optimal solution – but it was power, cooling, and data center floorspace. Other
organizations were able to repurpose hardware for use in
what you had, and what worked at
other initiatives, effectively avoiding the need to purchase
the time.” and pay operating expenses for new hardware to serve the
purpose.

ESG Modeled Analysis

ESG leveraged the information collected through vendor-provided material, public and industry knowledge of economics
and technologies, and the results of customer interviews to create a multi-scenario three-year TCO/ROI model that
compares the costs and benefits of migrating on-premises SQL Server instances to Azure SQL cloud database solutions.
ESG’s interviews with customers who have recently made the transition, combined with experience and expertise in
economic modeling and technical validation of Azure SQL, helped to form the basis for our modeled scenario.

ESG based the scenarios on a modeled organization currently running 200 SQL Server instances on-premises. In the first
scenario, the organization migrates the on-premises instances to SQL Server on Azure VMs. In the second scenario, ESG
compared the organization’s cost to continue to support existing modernized applications as well as development of new
revenue-generating applications on SQL Server on Azure Virtual Machines (IaaS) with the cost of shifting these workloads
to PaaS solutions like Azure SQL Managed Instance and Azure SQL Database.

Modeled Scenario #1: Migrating On-premises SQL Instance to SQL Server on Azure VMs (IaaS)

ESG assumed that the organization’s on-premises environment consisted of

SQL Server deployments on bare metal and virtualized servers. Virtualized
Why This Matters
servers were virtualized 4:1 using SQL Server Enterprise Edition, and physical On-premises databases can be
server instances deployed SQL Server Standard Edition. Together, the modeled expensive to deploy and
organization used a mix of 4-core (25%), 8-core (50%), and 16-core (25%) maintain, and they don’t offer the
servers and VMs for a total of 200 SQL Server instances migrated to Azure VMs. flexibility and scalability of cloud
The on-premises deployment also consisted of 10 top-of-rack networking databases. But understanding all
switches and a SAN storage array providing an average of 500 GB of storage to of the costs to consider before
each instance. Furthermore, ESG assumed Windows Server and SQL Server making a change can be difficult.
licenses and Software Assurance would be paid at the same rate for either on-
premises deployment or in Azure, so these costs were not included in Figure 3. ESG’s modeled scenarios, based
on validation with real world
First, ESG modeled the difference in cost for the modeled organization to customers, illustrate some of the
continue operating on-premises with refreshed hardware (left bar in Figure 3) costs and benefits that should be
and to continue operating on-premises with existing hardware (middle bar in considered when performing your
Figure 3). Refreshing hardware would require the large capital expense of own TCO analysis.
repurchasing existing hardware but with the advantage of running on modern

© 2020 by The Enterprise Strategy Group, Inc. All Rights Reserved.

 Economic Validation: The Economic Value of Migrating On-premises SQL Server Instances to Microsoft Azure SQL Solutions 9

and dense hardware platforms. Because the refreshed hardware would be more efficient, data center operational costs
would be slightly lower than continuing to operate existing infrastructure, which would also require expensive extended
support and maintenance contracts.

Next, ESG modeled the cost of running the same workload on SQL Server on Azure VMs. ESG sized the Azure VMs using
general purpose Dv3 instances with localized SSD storage that best met the compute and memory requirements for each
on-premises instance. The seamless lift-and-shift nature of the migration process minimizes the cost of business
interruption, and the modeled organization benefited from a bring-your-own-license model and the Azure Hybrid Benefit
for SQL Server and Windows Server. Operating on Azure VMs also allowed the modeled organization to reduce risk,
improve business agility, and easily integrate with the Azure ecosystem. As shown in Figure 3, ESG’s model found that over
a three-year period, organizations can save up to 47% when migrating their database from on-premises deployments to
Microsoft SQL Server on Azure VMs.

Figure 3. Expected Three-year Total Cost of Ownership for 200 SQL Server Instances

Source: Enterprise Strategy Group

What the Numbers Mean:

• As long as valid Software Assurance (SA)2 is maintained, ESG found that Azure SQL on VMs with 3-year reserved
pricing and Azure Hybrid Benefit for SQL Server and Windows Server pricing provided a significant savings
(approximately 96%) versus on-demand pricing.

• ESG modeled the expected administrative benefits by assuming that the on-premises deployment was currently
being managed by two full time systems administrators, three full time database administrators, and half of a
network administrator’s time. Using what we learned from customer interviews weighed to individual tasks, ESG’s
models predicted a cumulative 45% lower cost of administration for Azure VMs.

• Many of the additional benefits provided by improved business agility, reduced risk, and ability to integrate with
the Azure ecosystem are not reflected in the expected 47% savings, but for some larger organizations, these
benefits could easily account for millions of dollars per year and dwarf the 47% savings provided by TCO analysis.

2 Note the cost of licenses and SA is not included in this chart due to equivalency but should be considered a part of the total cost of the solution.
© 2020 by The Enterprise Strategy Group, Inc. All Rights Reserved.
 Economic Validation: The Economic Value of Migrating On-premises SQL Server Instances to Microsoft Azure SQL Solutions 10

Modeled Scenario #2: Migrating Azure VMs (IaaS) to Azure SQL Managed Instance and SQL Database (PaaS Solutions)

In certain instances where workloads are modernized to be able to run on the latest version of SQL Server or developed in
a cloud-ready manner, organizations can benefit by taking advantage of additional Azure managed services like Azure SQL
Managed Instance and Azure SQL Database to further reduce the operational overhead required to manage instances and
take advantage of increased business agility for developed applications. In the second scenario, ESG assumed that 50 out
of 200 total database instances migrated to Azure VMs were modernized and ready to take advantage of the latest version
of Azure SQL Managed Instance. These 50 instances were assumed to be managed by a single systems administrator along
with a single database administrator. By moving to SQL Managed Instance, the organization was able to reduce the need to
manage the virtualized instances and SQL Server administration cost by 90%, thereby freeing up the admins’ time to work
on other projects.

In addition, ESG assumed that the organization currently deployed 10 revenue-generating applications on Azure VMs that
each generated $250K per month, and a growing development organization was able to develop and release a new
revenue-generating app every six months, as well as incremental software updates to existing apps every 3 months. ESG
assumed that by moving these applications and development efforts to Azure SQL Database, the two person DevOps team
that had been managing the SQL Server virtual machines were completely freed from managing VMs, operating system,
and SQL Server instances. In addition, they no longer had to provision new VMs and instances for test/dev or new app
deployment or balance and tune the database. The cumulative time savings of forgoing these tasks was calculated to be a
53% reduction in administrative hours.

Figure 4. Assumptions for Migrating Azure VMs to Azure SQL Managed Instance and Azure SQL Database

Source: Enterprise Strategy Group

When migrating from VMs to Azure SQL Managed Instance and Azure SQL Database, the time and focus that DevOps and
developers are able to redirect to higher value tasks can be vitally important to an organization. In conjunction with
modern development methods, by shifting focus from database operations to applications management, developers can
create and deploy applications much faster (up to 40% faster time to value). ESG assumed that the faster development
cycle, quicker deployment results, and faster time to market would enable developers to reduce the time to develop a new
revenue-generating application from 6 to 3.6 months. ESG’s model predicted that bringing a new app to market at earlier
intervals cumulatively would result in $18M of additional revenue as each application would contribute to revenue streams
earlier. In addition, ESG assumed that releasing product updates with increased frequency would result in organizations
gaining competitive advantage and differentiation and improve customer retention through faster bug fixes. Finally, ESG

© 2020 by The Enterprise Strategy Group, Inc. All Rights Reserved.

 Economic Validation: The Economic Value of Migrating On-premises SQL Server Instances to Microsoft Azure SQL Solutions 11

predicted that each product update release would result in an increase in revenue of 1.5%, accounting for a cumulative
increase of an additional $12.6M over three years.

As shown in Figure 5, ESG’s model predicts that over a three-year period, migrating to Azure SQL Managed Instance and
Azure SQL Database would provide a TCO that is 17% lower than continuing to operate databases on Azure VMs.
Organizations that migrate to Azure SQL Managed Instance and Azure SQL Database will find that the reduction in
spending on application administration and system administration relative to Azure VMs will more than make up for the
increased cost of cloud spending. While every organization’s requirements are different, and your particular savings may
vary, ESG recommends that each organization consider the categories and potential benefits and savings outlined in this
report to perform their own analysis to better understand the potential saving.

Figure 5. Expected Three-year Savings and Benefits Provided from Azure SQL Managed Instance and Azure
SQL Database

Source: Enterprise Strategy Group

What the Numbers Mean:

• Azure SQL Managed Instance and Azure SQL Database may not be right for every SQL workload. Legacy SQL
Server instances, applications, and tools can offer excellent value on SQL Server on Azure VMs. Modernized
instances and applications are good candidates to move to Azure SQL Managed Instance or Azure SQL Database.

• While not modeled in this analysis, significant savings can be achieved by organizations whose workloads benefit
from the advantages provided by the Azure SQL Database serverless option that are perfect when workload
demand is unknown (such as new or bursty applications). The serverless option helps to avoiding overprovisioning
of resources when demand is below expectations, enables autoscaling of resources when demand surpasses
expectations, and allows pausing of the database to minimize costs for intermittent workloads.

• Although the cost of cloud services for Azure SQL Managed Instance and Azure SQL Database is much greater
than that for SQL Server on Azure VMs (3.4x higher), the expected savings in systems, database, and applications
administration makes the total cost of ownership for Azure SQL Managed Instance and Azure SQL Database lower
by 17%.

© 2020 by The Enterprise Strategy Group, Inc. All Rights Reserved.

 Economic Validation: The Economic Value of Migrating On-premises SQL Server Instances to Microsoft Azure SQL Solutions 12

• In some cases, the cost of Azure SQL Managed Instance or Azure SQL Database will be higher than SQL Server on
Azure VMs. Even in these cases, it is important to consider the benefits provided by freeing up cycles, speeding up
workflows, automating AI-powered tuning, and implementing serverless scalability that can directly impact
revenue.

The Bigger Truth

SQL Server has powered organizations for decades, enabling organizations to build tools, processes, and products that are
critical to both operations and company revenue generation. As these organizations look to modernize and take advantage
of the agility offered by the cloud, Microsoft Azure provides a seamless transition to a platform built for SQL that can
provide improved business value without risk. Azure offers the expertise, tools, and products that make migration and
modernization of SQL Server workloads simple and cost-effective, and development of cloud-ready applications faster and
more scalable.

ESG validated the savings and benefits that customers have seen since migrating their on-premises environments to Azure.
While cost savings and operational efficiency improvements were certainly substantial and perhaps the largest justification
for initially making the transition, every customer we spoke with was truly excited about the many new possibilities and
what they meant to their businesses going forward. These organizations were able to transform from being overworked
reactive departments supporting legacy applications and struggling to find workarounds to imposed limitations, to feeling
empowered with more time, a greater set of skills, and new tools to positively impact the bottom line of the business.

ESG’s models conservatively predict a 47% savings for an organization moving on-premises SQL Server instances to SQL
Server on Azure VMs, and a further 17% reduction when moving modernized instances and cloud-ready applications to
Azure SQL Managed Instance and Azure SQL Database respectively. ESG’s models also predict over a $30M improvement
to revenue as a result of faster and more agile development and deployment of new applications made possible with SQL
Database.

Because every deployment and organization is different, it is impossible to predict the savings and benefits that every
organization might achieve. But one thing is certain: By moving your workloads to the Azure cloud, you will immediately
become more operationally efficient and be in a better position to react to the changing needs of your business. If you are
looking to migrate your on-premises SQL Server deployments to the cloud, modernize your platforms and applications, and
streamline the development and deployment of cloud-ready applications, ESG suggests that you strongly consider
Microsoft Azure SQL.

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