Gone is the time when cloud computing was simply regarded as a virtual resource hosted on some service vendor’s network. Today, cloud hosting technology is a widely acknowledged model that offers flexible computing benefits in a highly secured environment.
The industry experts claim that the adoption of this cutting edge technology can not only help all size enterprises meet IT requirements at a relatively lower TCO (total cost of ownership) but also results in higher ROI (return on investment) as compared to the traditional hosting models.
At face value, a firm can save money by shifting to the cloud, which mainly signifies that it can optimally allocate its internal resources to generate better value. Many service providers offering cloud solutions frequently deploy economical commodity hardware along with a software management layer that provides the flexibility to have customized configurations. This allows organizations to easily move to the cloud, which in turn, leads to higher returns on the technology investments.
Let’s dig deeper to understand how cloud ROI can help enterprises in assessing the benefits of this technology that extends beyond the monetary value
According to a recent survey conducted by the InformationWeek, about 80% of the respondents are evaluating the ROI for their cloud projects, while only 20% companies indicates that they are not measuring the cloud computing benefits.
Cloud ROI can be calculated from the following formula:
Cloud ROI = (Benefits from Investment – Cost of the Cloud Investment)/ Total Cost of Investment
Calculating return on investment for the cloud requires up-front tasks for understanding the basic business needs, regulatory requirements, enterprise maturity stage, and various other control considerations. This enables businesses to analyze costs and benefits related to the cloud computing model.
While the strategic advantages can be more subjective, requiring further analysis for evaluating financial effect over the capital investment. Measuring ROI is a simple method that supports enterprises in making investment decisions. It is based on the realistic expectations and offers 3 major application delivery benefits:
- Improved efficiency of an organization’s internal process development cycles
- High availability, performance, and inherent resiliency of the cloud-based applications
- Ability of a company’s IT team to combine cloud-based applications in a synthetically built application catalog
To sum up, even though it is comparatively difficult to quantify the returns from the cloud computing model as it offers intangible benefits, the ROI method can still enable organizations to budget their IT expenditure at every stage of the cloud development.