Business StrategyThe ROI of moving to the cloud: Have you balanced your cloud checkbook?

Executive Summary

While SaaS in the public cloud enjoys a nearly 90 percent adoption rate, nearly 77 percent of companies use a private-cloud platform, while 71 percent use some form of hybrid cloud. Yet, most companies have no real evidence that they are operating more efficiently, less expensively, or with greater reach than if they were doing the same functions on-premises. This article discusses how to find out by building metrics, creating comparison models, and analyzing the data in a way stakeholders can understand.

Executive Summary

While SaaS in the public cloud enjoys a nearly 90 percent adoption rate, nearly 77 percent of companies use a private-cloud platform, while 71 percent use some form of hybrid cloud. Yet, most companies have no real evidence that they are operating more efficiently, less expensively, or with greater reach than if they were doing the same functions on-premises. This article discusses how to find out by building metrics, creating comparison models, and analyzing the data in a way stakeholders can understand.

Cloud has become a fact of business life. More than 95 percent of companies are using some cloud services to reduce cost, improve their agility, make their business more efficient, or improve their capability to roll out new services to the broadest audience possible.

While Software as a Service in the public cloud already enjoys high adoption rates—nearly 90 percent, according to RightScale—both private and hybrid clouds have enjoyed the greatest gains. Nearly 77 percent of companies use a private-cloud platform—including Infrastructure as a Service and Platform as a Service—while 71 percent use some form of hybrid cloud.

Yet, there is a gulf of pain between using cloud services and successfully using cloud services. Most companies may have a sense of how cloud services are helping their business, but no real evidence that they are operating more efficiently, less expensively, or with greater reach than if they were using on-premises equipment. Businesses do not know whether they have incurred greater technical debt—which will add to costs in the future—or whether they have balanced their cloud checkbook.

Accounting is important to the success of any cloud rollout. The steps may be simple, but not easy.

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1. Build metrics

Companies should start by defining where they have been. Most cloud services are not just additive; they are replacing older, on-premises infrastructure. At the same time that businesses save on the capital costs of server and network hardware, their recurring expenses will likely increase. The cost of that infrastructure—measured in any number of ways—is the data that is important to measure.

The easiest way to do this is to determine the problems that are causing the most pain for workers. Once those pain points have been identified, find a way to measure them for the existing infrastructure.

Accounting is important to success. The steps may be simple, but not easy.

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2. Create models to compare different infrastructures

Because metrics are necessary to compare two different types of infrastructure, companies need to figure out how to measure the data in each case. Figuring out the total expense of a specific application or service needs to take into account the capital expenditures and amortization of technology over time—costs that are included in cloud services operational fees.

Any data collection should be baked into the system so that all measurement is done automatically. This makes comparing metrics something that can be done at the push of a button.

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3. Analyze the data and discuss with stakeholders

Any technology management function is a feedback cycle—whether it’s the Six Sigma DMAIC Process (define, measure, analyze, improve, control) or the simpler PDSA Cycle (plan, do, study, act). Once metrics on the efficacy of the cloud service are collected, they need to be analyzed. Are the metrics correctly measuring aspects of value to the business? Are those aspects improving, not changing or worsening?

Each stakeholder should review the findings to develop a plan for the next cycle in the process. If the right data is not being measured, find a way to develop those metrics. If the move to cloud caused expenses to increase, time to provision to lengthen, or fewer workers to be served, then management needs to find a way to fix the issues.

The most important thing to keep in mind is that the benefit of cloud is ongoing. Any move to a cloud infrastructure, platform, or service is not a one-time process, but a journey to improve your business.

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