Business has limited resources to allocate towards investment opporutnities and must make judgement calls as to where to allocate funds that will achieve a return, with a considered risk profile.
Cloud solutions are not a must for businesses to operate, especially where existing IT Services are in place. They fall under the same evaluation criteria as other investment opportunities. That is, they must be evaluated on its merits on a business case and compared to other investment opportunities.
One of the key ingredients to enable comparison between investment opportunities is a Return On Investment (ROI) study. The ROI enables the business leaders to quantify an investment opporutnity and benchmark it against alternative options. Generally speaking there are four levers for improving the return on an investment opportunity: decrease the investment itself, increase revenue, decrease costs and/or deliver a faster return. With regards to the four levers, the opporunity exists to improve the relationship between the levers, not necessarily the absolutes of the levers.
Cloud Solutions may contribute to an ROI through productivity improvements, improved speed of/to operations, quality of service, and scale. Each of these contribution factors are described in more detail below.
Productivity can be improved by the improvement of resource utilisation, implementation of usage based pricing, via benefits derived from specialised scale and simplified IT Asset Management.
Resource utilisation is improved with Infrastructure as a Service (IaaS) and Software as a Service (SaaS). IaaS cloud solutions leverage virtualisation technology and SaaS cloud solutions leverage multi-tenanacy capabilities to drive higher resource utilisation. Do More with Less.
Usage based pricing productivity benefits are derived from paying for less resources. That is, you only pay for the resource you use in the cloud solution, as opposed to a traditional model where you acquire the resources required to handle anticipated peak load (plus a little more….) over the lifecycle of the asset.
Specialised Scale available at the cloud solution provider drives productivity benefits for the end consumer. For example, when a problem occurs, the cloud provider has specialised skills (as opposed to end consumer general skills) and the cost of problem resolution is amortised over a larger user base.
IT Asset Management is often simplified through the provision of cloud solutions. The end consumer releases “assets”, along with some control and flexibility. What they gain is a lower total cost of ownership via this smaller and simpler asset portfolio, which is often neglected or is an afterthought during the acquisition phase of new IT.
Speed of Operations
Cloud solutions offer the end consumer the ability to drive faster time to deployment and lower lifetime costs.
Provisioning time (with either directly or indirectly attributed expense and opportunity cost) can often be compressed from weeks to hours.
With faster provisioning times and a usage based pricing, the end consumer often benefits from higher rates of cost reduction and increased profitability.
Quality of Service
Global markets with increases in competitive pressure are forcing prices down along with businesses operating on lower margins. Quality of Service is often sacrificed under these conditions, which is not in the long term interests of the business. Cloud solutions offer the capability to operate the business with lower operating cost models, improving the capability for sustainable margins world class quality of service.
Cloud solutions offer businesses the capability to introduce new services or quickly enter markets that were previously uneconomical to access. Revised business models are possible, with the business consumer now able to offer their own capabilities on cloud solutions, with the ability to become a cloud provider in their own right.
Cloud solutions offer quantifiable benefits, as highlighted above, along with a risk profile that must be considered. They must be tested with a business case. It is feasible to quantify the Return on Investment so the business can evaluate merits and risks as it would with other business investment opportunities.