Cloud expenses: How to forecast ROI before and after cloud adoption
Cloud expenses are becoming a more significant concern for enterprise leaders who are looking to transition from traditional organizational operating models and infrastructures into today’s mobile world. In fact, IDC projects that spending on cloud environment IT infrastructure will hit $54.3 billion by 2019, growing at a CAGR of 15.5 percent.
Luckily, with a little planning and forethought, forecasting ROI before and after the adoption of cloud technology and environments doesn’t have to be as mystifying a process as it may seem. Whether you’re looking to make a complete shift in IT operations or simply migrate your enterprise to more efficient hybrid or private cloud frameworks, the long-term value of making this transition is becoming more clear than ever.
Before you begin this process, you should look at potential expenditures from two distinct standpoints:
- Actual cost: The hard-dollar figures and cloud expenses that are associated with making these migrations.
- Opportunity cost: The potential opportunities and/or productivity gains that your enterprise might win or lose based on cloud infrastructure investment, or lack thereof. While it may cost more in the immediate future to invest in these upgrades, there are potential gains in terms of output, cost savings or new business opportunities that can be recognized by making these migrations. These gains may more than underwrite the actual long-term investment cost.
As such, in order to measure the ROI of potential cloud-based shifts in IT infrastructure, you should consider the potential outcomes of making the switch in operating models. These may include:
- Boosts in organizational speed and agility
- Greater efficiency and cost savings
- Improvements in productivity, market intelligence, customer service and retention
- Reductions in headcount, complexity and time to market
- Additional opportunities for your enterprise to innovate and grow
Assigning a dollar amount to each outcome
Once you have considered the potential outcomes, you can assign an estimated dollar amount to each. Likewise, you can consider any tangential benefits that may result from making the upgrade that may not have a direct impact on costs.
Keep in mind that the benefits of a cloud or virtualized IT migration can often multiply and compound. After all, improving organizational performance in one area may often produce benefits in other areas. For example, switching to a cloud-based infrastructure and analytics model may allow you to better track customer buying patterns, allowing you to more rapidly improve multiple business products, services or processes.
Factoring in time horizons
When measuring ROI and gauging the impact of cloud expenses, you must take time considerations into account. Though it may take weeks or months to recognize performance gains, these improvements make major impacts to the bottom line when they hit.
Likewise, making the jump to new software solutions may seem like an expensive investment of time and money today. However, if doing so provides the essential tools, framework and IT solutions that your business needs to more rapidly and cost-effectively introduce new products, services and solutions to the ever-changing market, the investment may be a no-brainer.
Case in point: Upgrading to a new cloud-based customer relationship management system may seem like a sizable undertaking. But the potential cost savings and gains in output and performance that your enterprise may enjoy by doing so, especially as your workforce becomes increasingly mobile and virtualized, may far outweigh these initial costs.
In order to determine actual ROI, you have to measure more than just financials. You must also measure factors such as:
- Business intelligence
- Risk mitigation
Many enterprise leaders seek to measure the ROI of making the move to hybrid or private cloud infrastructures purely from the standpoint of P&Ls and balance sheets. But truly measuring the value of these investments — which can benefit an organization in a multitude of ways — is seldom as straightforward as comparing column A with column B. In order to gain a complete picture of the value of investing in these efforts, you need to do more than simply look at changing your technical infrastructure from a financial point of view. By doing so, you may be able to achieve:
- Better utilization of resources
- Greater scalability
- Shortened time to deployment
- Improved asset management
- Enhanced uptime
As you can see, cloud expenses aren’t always easy to gauge. But they become far easier to measure and understand when you take a more holistic view, allowing you to see how this infrastructure can transform the shape of your enterprise.