Eight ways to measure cloud ROI

An initiative from The Open Group has developed a set of key considerations for how to build and measure return on investment for cloud computing initiatives from a business perspective. Mark Skilton reports

By Mark Skilton, Framingham | Thursday, 27 May 2010
Eight Ways to Cloud Computing ROI

The problem with using the view of capacity and utilization alone is that it is a technology provider/seller viewpoint essentially based on key performance indicators (KPIs) rather than business benefit metrics. This model is primarily concerned with two specific measurements:

• IT capacity - measured by storage, CPU cycles, network bandwidth or workload memory capacity as indicators of performance.
• IT utilisation - measured by uptime availability and volume of usage as indicators of activity and usability.

But effective cost/performance ratios and levels of usage activity do not necessarily imply proportional business benefits. They are just indicators of business activity that are not in themselves more valuable than lower operating cost. What is needed instead is a set of business metrics that build on the cloud computing model.

The following are business metrics that can help translate the indicators from the capacity-utilization curve to direct and indirect benefits to the business:

1. The speed and rate of change - Cost reduction and cost of adoption /de-adoption is faster in the cloud. Cloud computing creates additional cost transformation benefits by reducing delays in decision costs by adopting pre-built services and a faster rate of transition to new capabilities. This is a common goal for business improvement programs that are lacking resources and skills and that are time sensitive.

2. Total cost of ownership optimization - Users can select, design configure and run infrastructure and applications that are best suited for business needs. Traditionally this has often been decoupled when IT projects are handed off to production services. In cloud computing environments these are joined up.

3. Rapid provisioning - Resources are scaled up and down to follow business activity as it expands and grows or is redirected. Provisioning time compression can go from weeks to hours.

4. Increased margin and cost control - Revenue growth and cost control opportunities allow companies to pursue new customers and markets for business growth and service improvement.

5. Dynamic usage - Elastic provisioning and service management targets real end users and real business needs for functionality as the scope of users and services evolve seeking new solutions.

6. Risk and compliance improvement - Cloud computing green capabilities can be leveraged through shared services.

7. Enhanced capacity utilization - IT avoids over-and under-provisioning of IT services to improve smarter business services.

8. Access to business skills and capability improvement - Cloud computing enables access to new skills and solutions through cloud sourcing on demand solutions.

These measures define a new set of business indicators that can be sused to create a "score card" of your current and future operational business and IT service needs relating to cloud computing potential. The work of The Open Group is developing tools and frameworks to enable businesses to evaluate these cloud computing opportunities to focus on how flexibility, competitive advantage, compliance risk and security in all aspects of the cost of cloud adoption can be better defined in a business language.

Mark Skilton is currently Global Director responsible for applications strategy and service offer development for Capgemini Global Applications Outsourcing Services. He can be reached at mark.skilton@capgemini.com.