Is Cloud ROI dead?
Updated: Oct 16, 2020
Reviewing the current marketplace, the concept of calculating a financially based ROI for cloud investment seems to come up time and again, evidenced over many past years. It offers an important justification for cloud migration as well as being a good measure of success for those already established in the cloud. For many CIOs, establishing a reliable ROI measure both from project conception and throughout the life of the project is a daunting task.
No CIO enjoys a review of their cloud expenditure by their CFO. There are even examples where CEOs have been dismissed for profitability issues associated with key digital transformation projects that have failed to deliver comprehensively or have been misunderstood to be too costly.
A number of approaches exist to assess what is more widely termed as Cloud Economics. Whilst this term covers more than just savings on cloud costs compared to existing services, traditionally the strongest metrics will be based on the financial aspect of Cloud ROI. External experts can help. At the advisory level there is plenty of strategic consultation on offer to define the steps to maximise value in moving to cloud. However, the cost for any follow-up strategic consultancy, let alone implementation services can be expected to be high. Resellers look to fill the delivery gap with smaller scale Cloud Readiness Assessment services. CIOs must still do their own due-diligence here to ensure that a Cloud ROI is understood and clearly visible.
Cloud ROI Calculators (usually produced by Vendors, Public Cloud providers and SIs) tend to vary in scope. Some are designed to be extremely brief in order to provide a speedy response. Others tend to be more comprehensive and add legitimacy by having an independent research organisation develop or endorse them. It is clear that there is no industry standard for producing such Cloud ROI Calculators – the owners produce whatever suits their own products and services using proprietary methodologies.
Based on the many available options, the approach to producing a reliable Cloud ROI isn't clear cut. So CIOs have to tread carefully and use their own judgement to ensure any ROI assessments are comparable. For example, taking into account hidden factors like energy consumption in the data centre and the full costs of IT resource salaries.
Increasingly a financial ROI itself is no longer seen as the only justification for cloud projects. Positive outcomes must be maximised. For example, a cloud approach offers variable OPEX costs versus high and fixed CAPEX costs of the data centre. Improvements by utilising an ‘as-a-Service’ approach to operations and support should be clear and visible. Agility benefits in provisioning new application services and the infrastructure that supports cloud workloads needs to be in stark contrast with heritage practices and service provisioning in the data centre.
Risks must be managed. Budgets must be predictable. Many public cloud providers have improved their tools and their best practice advice for cost management that they offer today. Customer Experience must be protected and improved throughout the cloud project. Audit and Governance should not be neglected – this requires an increased focus for Observability and Cyber Security for example. Risk management is even more crucial since the Covid Crisis as organisations struggle with reassigning their IT budgets to enable mobile workforces and online services for their customers.
In conclusion, the responsibility to define the Cloud ROI remains with the CIO and accountability with the CIO’s team. Large organisations can afford to establish a fully staffed Cloud Centre of Excellence, CCoE, to take ownership of such tasks. For smaller organisations attaining these goals can be achieved with the inclusion of a trusted and independent partner to fill skills gaps and help with the formation and operation of the CCoE.
At MultiCloud Global, our approach is to offer a CCoE-as-a-Service solution which aims to enable reliable assessment and reporting of Cloud ROI. The Cloud ROI process is controlled and driven by the CIO and the CIO’s team with MultiCloud Global providing flexible services as required. In this way we positively use Cloud ROI assessment and reporting to help our clients to accelerate their cloud ambitions – all the while keeping the CFO happy of course.