Tying Cloud Costs to Return – The Hunt for ROI

Cross posted from the Cloudability blog

In difficult economic times, every manager within an organization is feeling the pressure to reduce budgets. Given this fact, it is unsurprising that customers are often looking to cloud cost savings as the primary driver for a move to cloud technologies. Given this customer demand then, it is also unsurprising that vendors are quick to point to cost savings as the primary return on investment (ROI) from the Cloud.

While this is understandable, it is also counter-productive and simplistic. True cost is a relatively easy thing to measure, and it’s hard to look past a product claiming a significant cost saving; we believe the conversation should move far beyond cost savings. Analysts have spent significant amounts of time calculating cost comparisons between the Cloud and self-hosted infrastructure but in doing so they fail to focus on the real benefits of the Cloud.

In a recent blog post we detailed some areas where cloud costs make an appreciable non-direct economic positive impact on an organization:

Speed – Very simply, the Cloud is faster than a comparable on-premise solution. The time-to-deployment metrics for cloud applications or cloud infrastructure overwhelmingly speaks to this point. Users should sign up for a cloud application and compare the time it takes to buying, installing and learning often unfriendly traditional software. Similarly, setting up a server with a cloud infrastructure vendor is far quicker than the often painful process of requisitioning, getting final approval for, and waiting for deployment of physical hardware. Like for like, Cloud is faster. And that drives indirect economic benefits.

Focus – During difficult economic times, organizations are expecting more from their people for less and everyone is busier than ever before. Any solution that gives organizations the ability to focus on core business and ignore the minutiae of un-strategic matters is beneficial for the organization. It’s a somewhat clichéd analogy but one wouldn’t expect a CIO to worry about maintaining the turbines at her own power plant, maintaining software and servers is the same. Abstraction equates to focus and that delivers economic benefits.

Agility – Silicon Valley has an overused term – “The Pivot” – to describe the trend of businesses changing who they are and what they do. But even outside of Silicon Valley, all organizations have similar pressures to start quickly, move quickly and change direction quickly. Cloud computing, with its utility pricing, ease of set up and lesser degree of lock-in than other alternatives, increases an organization’s ability to be agile. Agility delivers competitiveness and that drives economic benefit.

Given these individual benefits of Cloud then, we need a system that can match cost with outcomes. This is a two-step process and for this to occur, some problems need to be resolved:

• Transparency Over Spend – with individual users often signing up themselves for cloud services, it is difficult to get a single picture, across the entire organization, of where cloud spend is actually occurring. A number of vendors are looking at this problem space and trying to build a “single pane of glass” in terms of Cloud spend
• Spend Not Yet Tied to Revenue – the second stage of tying cost to return is to integrate this complete picture of cloud spend to the actual revenue line of the organization. This is a deeper challenge and one which financial software companies need to resolve. Having the ability to directly pin particular cloud cost with a particular revenue line will aid in the delivery of a true measure of ROI rather than a simplistic cost saving