In most businesses, return on investment (ROI) means that the earnings from the investment must exceed its entire investment cost. However, cloud ROI is entirely different. Instead of measuring the cost of investment versus the earnings, it should measure the return on innovation. Although many business leaders are after dollars and the amount of money gained after subtracting the cost of the technology, the truth is that these are not the only things that should be looked into. The most effective approach to ROI calculation is where organizations place value on the agility of their businesses after the implementation of a cloud project and measuring the long-term benefits that will come along with such investment.
However, the definition of agility can be a problem and often differs from one organization to the other depending on their business and what they are involved in. The measurement can be in terms of the impact of the cloud in increasing time-to-market, improving products, or enabling companies to respond to the market conditions quickly. Cloud computing enhances the adaptation of various aspects in the business environment without losing focus and momentum. Furthermore, the cloud offers long-term flexibility, which enables businesses to progress and innovate faster. These are the benefits that cloud computing should measure as return on innovation instead of the usual ROI.
If the cloud enables businesses to meet peak demands faster, productivity can increase, and opportunities that could have been lost if there was no cloud scalability are recovered. Leverage is another critical determiner of cloud ROI. A cloud platform can offer an organization with the proper infrastructure for managing many applications. Cloud computing allows sharing of resources and storage between multiple individuals and departments and gives cloud providers multi-tenancy economies of scale that reduce the cost of cloud services compared to the on-premise servers.
Cloud is not just an investment. Instead, it is also an innovation. You will need to understand the impact that going digital will have on your transformation plan. For example, in the banking industry, developing a mobile application that eases customer deposits for millions of users might take time to design, develop, and implement. However, taking advantage of serverless technologies reduces the complexity, cost, and time needed to develop an application. Although the end product will be the same, the company using cloud services will win more customers because it will waste no time, spend less money to acquire customers, and get the largest profits. When calculating cloud ROI, the return on investment takes into account the switching cost and time taken to move to the cloud platform, acquisition of skills, risk factors during the changeover, and the new economic model. It also enables understanding of the new set of cash flows that will originate from the new platform.
Generally, it is vital for organizations first to understand the entire cost of implementing a cloud solution. While doing so, they need to consider what the agility offered by the cloud provides. Although clients might be the target in the cloud investment and the agility provided, the entire organization gains from the new solution and business setup.