Calculating the roi on cloud

1. Calculating the ROI on Cloud | CloudTweaks.com - Cloud Computing ... http://www.cloudtweaks.com/2011/11/calculating-the-roi-on-cloud/
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by cloudtweaks on November 30, 2011 at 6:03 am in Case Study, Cloud Computing, Companies, Computing,
Contributors, SaaS, Security, Storage, Technology
Calculating the ROI on Cloud Tweet 69
IDC calls cloud computing “one of the most potentially transformative developments in the information
technology world in the last 20 years.”
Many companies have already chosen virtualization – generating a straightforward and easily measurable
ROI through the deployment of basic applications such as email and collaboration. Assessing the ROI of
further investments in private cloud and PaaS, for example, is more complex and the ROI is often unclear.
This can raise a roadblock for further corporate investment in cloud. Additionally the recent economic
recession has pressured corporate profits to cut technology spending and limited further investment in cloud.
In spite of these roadblocks cloud computing will soon be a business imperative.
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2. Calculating the ROI on Cloud | CloudTweaks.com - Cloud Computing ... http://www.cloudtweaks.com/2011/11/calculating-the-roi-on-cloud/
Before the ROI: The Cloud Assessment
Before actually calculating the ROI, companies must baseline the cost of their existing applications and
determine suitability of current applications for cloud migration. This can be done in a variety of ways. At
Persistent, we have developed a Cloud Assessment Tool which takes customers through the entire
assessment and ROI process.
Figure 1: Showcasing Persistent’s Cloud Assessment Framework
This can be done in a variety of ways. In order to calculate ROI, one must:
1) Identify Deployed Applications in the Enterprise
2) Analyze Workloads and Business Heuristics for Each Application
3) Develop a Recommended Cloud Strategy (On-premise vs. Cloud)
It is important to understand how the overall ROI can be achieved even when spending more upfront. It is only
after the Cloud assessment is done that the ROI of moving to the cloud can be calculated.
Cloud ROI is composed of 3 major benefit areas:
Cost Reduction
Productivity Enhancement
Revenue Transformation
Cost Savings from Cloud
After categorizing an enterprise’s applications and base-lining its costs, companies can estimate their
potential cost savings. It is possible to generate a ROI of 50% for a Tier 1 workload and a ROI of 70% for a
Tier 3 workload. For example, the following are the results for a recent ERP migration to a public/private cloud
performed at Persistent.
Reduce number of servers from 82 to 11
Reduce number of racks from 11 to 1
Generate 50% CAPEX savings
Generate 80% OPEX savings
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3. Calculating the ROI on Cloud | CloudTweaks.com - Cloud Computing ... http://www.cloudtweaks.com/2011/11/calculating-the-roi-on-cloud/
Labor
Labor costs offer the best direct savings for every dollar of IT budget shifted into the cloud. A typical global
enterprise spends 67% of its IT budget on labor, including 40% on application development and maintenance.
In the Cloud, labor assigned to manage infrastructure can be significantly reduced if not eliminated altogether
as applications in the cloud run on an automated platform. The typical person to server ratio in an enterprise
can be improved from 1:5 to 1:10 or even 1:15 as a result.
Software
Software expenditures make up 16%, the next largest piece of a global enterprise IT budget; including
application licensing and maintenance fees at 12% and infrastructure software at 4%. In the cloud, software
can be accessed at any station, by any user, independent of individual licenses, and is charged on a
per-image basis. This reduces overall software licensing and maintenance costs as companies pay only for
what they use, turning a previously fixed cost into a variable cost that can be targeted for optimization.
Hosting
The typical global enterprise spends 8% of its IT budget on hosting, including 4% on application servers, 3%
on facilities, and 1% on storage. That spending increases as the business becomes more complex and
requires more powerful hosting infrastructure. Compared to the on-premises model, hosting in the cloud can
produce returns in three areas:
CAPEX vs. OPEX: The biggest difficulty as well as cost savings associated with hosting on premises is
that all of the organization’s hosting costs are capital expenditures. Here the Cloud return potential is
clear: in the Cloud, costs are completely operational (OPEX) and pay-as-you- go.
Asset Utilization: Transitioning from an on-premises model to a cloud-based model allows enterprises to
more efficiently utilize the IT infrastructure available on-site.When an organization is approaching full
capacity with its existing hardware, the decision to move to the cloud can mean millions of dollars in
cost avoidance.
Power and Cooling: In allowing the organization to use its existing infrastructure more efficiently, and in
reducing the need for new capacity, the cloud model can significantly reduce the costs associated with
powering and cooling an enterprise’s data center.
Part 2 – The Cost of Cloud…
Article By Shreekanth Joshi
Associate Vice President, Practice Head for SaaS and Cloud /Persistent Systems
Solution Intel Cloud Intel accélère l'avènement du Cloud nouvelle génération ! www.intel.fr/cloud
Data Mining Automation Learn why KXEN was named a Leader. Free Forrester report. Get it now! www.kxen.com/datamining
Telco Cloud Service Mgmt New Revenues & Business Growth By Offering NG cloud-based services telecommunications.comarch.c
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4. Calculating the ROI on Cloud | CloudTweaks.com - Cloud Computing ... http://www.cloudtweaks.com/2011/11/calculating-the-roi-on-cloud/
* "The Lighter Side Of The Cloud" Comic by CloudTweaks – David Fletcher is licensed under a Creative
Commons Attribution-NonCommercial-NoDerivs 3.0 Unported License.
Tags: Cloud Computing, cloud model, Cloud-based, CloudTweaks, companies, cost savings, Hosting,
information technology, information technology world, infrastructure software, IT Infrastructure, maintenance
costs, Private Cloud, Storage, Technology, technology spending, virtualization
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1. Calculating the ROI on Cloud – Part 2 | CloudTweaks.com - Cloud Computing Community
says:
December 1, 2011 at 10:02 am
[...] Continued From Part 1 [...]
2. 3 Ways to Justify Cost Savings for an Enterprise Move to The Cloud | Enterprise Open
Source says:
December 2, 2011 at 7:05 am
[...] The average enterprise has hundreds of applications making software the second largest
expenditure for enterprise IT budgets at approximately 16%. The increased accessibility of
[...]
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