Monday, 1 October 2012

ROI of Cloud

As Cloud based services & solutions rapidly alter the delivery of IT to the business, the ROI – value proposition has generally focused on the benefits derived from:    

  1. Cost of Capital:  Capex vs. Expense funding in pay as you go models
  2. Commoditized support services: Infrastructure & Applications  
  3. Service Deliver: Faster & Less Costly Program rollouts
  4. Streamlined: Shorter upgrade cycles    
  • Is the business better off with skilled internal IT staff providing traditional software delivery services or directly working with the business determining new ways of delivering IT business services through cloud based SaaS solutions?  
  • Are your business customers already making these choices independent of internal IT?   

One component of the ROI calculation often over looked is the Opportunity Costs and Benefits.   Simplistically opportunity benefits are what is gained by making a choice and every choice has an economic opportunity benefit and cost.
Cloud Services & Solutions provide opportunity benefits to organizations by releasing both financial and human capital resources to deliver strategic business initiatives.  Consider the following choices?  
  • What is the business value of deploying internal support resources for commoditized lower cost support services?  

Scarcity occurs when wants and needs are unlimited, while the resources needed to produce goods and services to meet those needs and wants are limited.   As cloud services and solutions provide business alternatives to scarcity what is the business benefit of your IT service delivery to the business?

Case Study:  Cloud CRM  
A Midwest based supplier of dairy products estimated it would have required 80K to upgrade an existing custom internal CRM solution to allow interaction with the company’s franchises.   The business owners selected a Cloud based CRM solution that cost 20K to establish with a monthly service charge of 175 per user.
The net business benefit was the cost avoidance of 80K and elimination of internal support services of 110K annually. Internal IT absent from the decision process until integration questions arose, were surprised that the business opportunity benefit was 190K annually. Shortly thereafter the IT Leadership changed the focus of the internal IT organization to developing business acumen with a “Business Process Leadership” core value objective. 
Mike Van Buren | Cloud Evangelist

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