When meeting with potential customers they’ve often ask how they can determine their own ROI. I found that the calculations can be difficult depending on how you plan to use the cloud.
There are many reasons that businesses move and migrate to the cloud. Below are some quick statics from 2010 and 2012 on how business are using cloud services.
Using software as a service (applications delivery)
2010 – 34%
2012 – 40%
Using infrastructure as a service (storage or virtual servers delivery)
2010 – 21%
2012 – 25%
Using platform as a service (Web platform delivery)
2010 – 20%
2012 – 16%
Using data as a service (i.e., data lookup such as business intelligence, market data)
2010 – 13%
2012 – 16%
The above reasons why businesses use the cloud are important to understand because each category has different cost. For instance, hardware cost are different from software cost. As well, developing your own application can be very expensive, in contrast, purchasing “over-the-counter” software cost less and using a cloud SAAS model can be considerably less than a over-the-counter solution.
ROI – Return on Investment
ROI is a performance measure used to evaluate the efficiency of an investment or to compare the efficiency of a number of different investments. To calculate ROI, the benefit (return) of an investment is divided by the cost of the investment; the result is expressed as a percentage or a ratio.
Data points to consider
Here are some factors you should consider when calculating your ROI for cloud use:
- Initial capital expenses or savings
- Operational expenses for lifetime of project
- Reduced or increased staffing requirements
- Reduced or increased hardware requirements
- Reduced or increased software requirement
- Reduced or increased software licensing requirement
- Time savings for business unit employees or IT staff
- Provisioning costs or savings
- Network or systems management costs or savings
- Cost of staff time to implement or assist in implementing
- Cost of support
- Utility costs or savings
What your IT knows or doesn’t know
It is highly unlikely that your IT staff is getting up to speed on their own. I’ve lost track of how many IT managers, directors and VP’s I’ve talked with over the last two years who were completely bewildered about the cloud. But don’t blame them – running your day-to-day operations is a full-time job, plus having a couple of projects sprinkled in has completely buried them.
You may need to hire an additional team or allow a couple of cloud vendors to peek at your daily operation so they can help you determine what your ROI is and if cloud computing is a good fit for your business.
We should also look at a matrix for companies who purchase cloud services without IT involvement.
No – IT Involvement – 22%
Yes – IT is Involves – 69%
Don’t know – 9%
If you would like, we provide a Free Technical Assessment, this can be beneficial to new and startup companies that are not sure where to start. You can always find our cloud and hosted services in the right column of this page or by simply going to our website at Raven Cloud Computing.