Does Cloud ROI Matter? You Bet! - InformationWeek

InformationWeek is part of the Informa Tech Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them.Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.

10:44 AM
David Linthicum
David Linthicum

Does Cloud ROI Matter? You Bet!

Is cloud computing so interesting and innovative that business sense is beside the point? No way! The advantage to the business is why we do cloud computing. The core issue is how you calculate ROI. Follow me here...

Information Week's Jonathan Feldman had an interesting article on the fact that ROI may not matter as much as we think when considering cloud computing.

As Jonathan puts it, "Return on investment always matters. But I'm not sure that it matters so much with cloud-computing-the-model versus cloud-computing-the-specific-implementation. Specific cloud implementations may fail or succeed. But the model itself is promising enough that it may not matter whether a vendor's specific implementation succeeds."So, the idea is that cloud computing is so interesting and innovative that no matter if it makes business sense or not is beside the point? No way, man!

The advantage to the business is why we do cloud computing, and where that advantage does not exist, we should not do it. The core issue, as I see it, is how you calculate ROI. Follow me here.

There is really nothing that new in the cloud, it's just storage, compute, cores, middleware, security, etc., that you have delivered as a service. Most of those who calculate ROI around the use of cloud computing focus too much on OpEx vs. CapEx costs, and not enough of the strategic value of the use of the cloud, which is business agility.

The problem is that business agility is difficult to measure, but let me provide you with a few use cases. For example, the ability for a high tech company to automatically provision cores, as needed, to support a spike in demand around the launch of a new product line. Or, the ability to alter core business processes between suppliers to react to a quality issue that's costing the business 2 million dollars a day. Do you see the ROI now?

Cloud computing allows us to address our processing, compute, and storage requirements pretty close to as-needed. Thus, while we avoid CapEx costs, or the need to buy waves of hardware and software, you may actually find that OpEx costs far exceed CapEx costs, but who cares? That not where cloud computing makes money anyway, that's not your ROI.

The best way to approach the true ROI of cloud computing to look at the true inefficiencies that currently exist. Now, put money behind those inefficiencies, or how much they cost you daily, weekly, monthly, and yearly. Then, what would the ROI be if many of those inefficiencies did not exist? Within most enterprises, that number will add up to millions a month. The ability to leverage new technology, such as cloud computing, will provide ROI only if they are able to directly address those inefficiencies, typically by providing more business agility. Sometimes cloud computing does, sometimes cloud computing does not.

Cloud computing is like any other technology; we need to make a business case for it. I think we just need to better understand how to create the right business case. Always keep that in mind.Is cloud computing so interesting and innovative that business sense is beside the point? No way! The advantage to the business is why we do cloud computing. The core issue is how you calculate ROI. Follow me here...

We welcome your comments on this topic on our social media channels, or [contact us directly] with questions about the site.
Comment  | 
Print  | 
More Insights
IT Careers: 10 Industries with Job Openings Right Now
Cynthia Harvey, Freelance Journalist, InformationWeek,  5/27/2020
How 5G Rollout May Benefit Businesses More than Consumers
Joao-Pierre S. Ruth, Senior Writer,  5/21/2020
IT Leadership in Education: Getting Online School Right
Jessica Davis, Senior Editor, Enterprise Apps,  5/20/2020
White Papers
Register for InformationWeek Newsletters
The State of IT & Cybersecurity Operations 2020
The State of IT & Cybersecurity Operations 2020
Download this report from InformationWeek, in partnership with Dark Reading, to learn more about how today's IT operations teams work with cybersecurity operations, what technologies they are using, and how they communicate and share responsibility--or create risk by failing to do so. Get it now!
Current Issue
Key to Cloud Success: The Right Management
This IT Trend highlights some of the steps IT teams can take to keep their cloud environments running in a safe, efficient manner.
Flash Poll