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May 7, 2024 | Matt Pacheco

How Cloud ROI Helps Businesses Evaluate Cloud Migration

As workloads continue to grow, IT leaders may be looking to sell its benefits, like elasticity and scalability, of the cloud to their organizations. However, leadership teams can sometimes get caught up on the cost which causes difficulties in seeing the long-term benefits and the return on investment (ROI) of the cloud. Let’s explore what cloud ROI is, how to calculate it, and how to sell it to leadership to allow for more innovation and growth.

What is Cloud ROI?

Cloud ROI measures the financial benefit an organization gains by adopting cloud-based solutions compared to the initial and ongoing costs associated with them. While moving to the cloud can include an upfront investment, cloud ROI demonstrates how the investment will generate returns over time.

Measuring Cloud ROI – How is it Calculated?

It can be difficult to get an accurate calculation of cloud ROI when there are so many parts that may be added and removed during a cloud migration process. However, the basic calculation involves starting with the total cost of ownership for moving to the cloud and acknowledging savings earned from equipment, facilities, and components that are no longer needed.

Gains from the investment can be in the form of equipment savings, a decrease in licensing fees, savings on property costs, and more. Once those have been identified, organizations can take the gain minus the investment and divide it by the investment to get the cloud ROI.

It’s important to note that the ROI may not be positive immediately due to the total cost of ownership included in the investment. Making the initial switch can take a lot of time, require outside skills, and require a calculation of operating expenditures (OpEx) versus capital expenditures (CapEx).

Common Challenges in Measuring Cloud ROI

We’ve already mentioned that calculating cloud ROI can be a complicated endeavor, and this is due to a combination of complex cloud pricing, a need to quantify intangible benefits, and difficulty aligning business objectives with cloud investments.

Complex Cloud Pricing and Billing Models

Cloud pricing can be confusing for the initiated. Even seemingly straightforward monthly or annual licenses can come with hidden fees associated with going over set limits. Understanding how each cloud structure works, and which instances are right for your workloads, will untangle cloud pricing complexities.

Quantification of Intangible Benefits

While you will be able to quantify much of the savings about cloud migration, certain benefits are intangible or much harder to measure, such as increased agility or improved collaboration. You may be able to quantify this over time by looking at productivity levels and output before and after cloud implementation, but capturing this information can be more difficult.

Alignment of Business Objectives and Cloud Investments

Just because cloud computing is continuing to gain steam doesn’t mean that it makes sense for your business. You need to think about your objectives – where are you trying to go in the next year, the next five years, or the next decade? Organizations looking to compete in the digital landscape will likely benefit from cloud migration. However, if you have legacy applications or workloads that are hard to migrate, or your leadership team is not on board with making changes, it can be hard to align objectives with investments in cloud computing.

Tips for Selling the Value of the Cloud to Leadership

That being said, how do you get everyone on board if you feel that cloud migration is right for your business and would generate cloud ? Here’s how you can sell the value of cloud to leadership.

Craft a Compelling Business Case

Your business case for selling to the cloud to leadership should clearly communicate the strategic value of cloud adoption. This may be about how the cloud can enable better business agility and application performance, or how it can aid in your disaster recovery planning. Cloud optimization can bring several benefits, including improved performance, better connectivity, greater ability to scale resources, and so on. Identify which cloud features are most strategically beneficial to your business and use them in your pitch.

Clearly Outline Business Needs for Future Innovation

Selling a vision for the cloud isn’t just about your present situation, but about your future as well. The cloud enables rapid innovation by making faster development and deployment cycles possible. Cloud infrastructure can also power more demanding workloads, such as high-performance computing and artificial intelligence / machine learning (AI/ML).

Aging data centers can slow your progress and prevent future innovation. Conversely, the cloud can serve as an intelligence platform that can store large blocks of infrequently accessed data, achieve quicker response times, and serve as a safe repository for customer interactions.

Create a Cost-Benefit Analysis

A cost-benefit analysis should cover 5 years and include the following elements:

  • Capital equipment savings
  • Increased reliability and redundancy
  • Energy cost savings
  • Real estate expenditure savings
  • Efficiencies in staffing

Creating one can clearly demonstrate the bottom-line benefits cloud infrastructure can bring to a business.

Determine the Right Cloud Environment

The more well-researched your case for cloud is, the more likely it is to be picked up by leadership. Conduct some research to determine which environments may be best suited for your goals. Depending on the nature of your business, public, private, muticloud, or hybrid architectures may be appropriate.

Suggest a Phased Approach

Changes don’t need to happen all at once. You could create a cloud adoption framework that includes a phased approach and focus on low-risk, high-impact projects. Although the move to cloud requires an upfront investment, stepping into new projects can be an easier sell to leadership.

Clearly Communicate with Stakeholders

Whatever you decide to share, be sure to clearly communicate your goals, expected benefits, and implementation steps with stakeholders. Use the presentation to address concerns and reaffirm long-term benefits.  

Choosing the Right Partner for Cloud Success

One of the best ways to improve cloud ROI is by working with experts who are experienced in cloud migration. TierPoint’s experts understand the considerations and potential pitfalls that may get in the way of successful cloud adoption. Whether you’re considering a phased approach or a bigger project, we can help you plan and sell the cloud to your leadership team. Download our whitepaper to learn more.

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