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Show me the cloud ROI! It's not always easy

This blog post is part of our Essential Guide: Key IT metrics: A CIO guide

When mulling whether to go to a public cloud provider like Amazon Web Services or rely on private cloud computing, the letters R-O-I may appear before you like a vision. How can you figure it out?

Judith Hurwitz, president of IT consulting company Hurwitz & Associates, said there is no boilerplate analysis for determining the return on investment on cloud infrastructure, public or private. It depends on lots of different metrics.

“Maybe a metric is, ‘Are you meeting the requirements of partners?'” Hurwitz said. “Maybe you’re not in a highly regulated market, but your customers are and they have certain requirements that they expect you to fulfill before they’ll do business with you.”

Questions first — ROI later

That could push you toward a private cloud model — either a cloud built on the foundation of your company’s data center or a cordoned-off corner in a cloud vendor’s data center. So could a bill from a cloud provider that balloons from one month to another.

“It really depends on taking a step back and looking at, ‘OK, what am I doing here? What’s critical to me? What’s critical to my customers?'” Hurwitz said.

Then start asking more questions, she said, but swap the word cloud with infrastructure. Does the infrastructure you have in place meet the needs of your customers?

“If the answer is no, you’ve got to change,” Hurwitz said.

The human side

John Burke, an analyst at Nemertes Research, suggested a brute-force approach for determining cloud ROI. Just calculate it.

“There’s nothing particularly mysterious about the cost structures for systems of the data center,” he said. “You’ve got infrastructure, you’ve got staff, you’ve got services — and you can assign costs to each.”

Burke said IT shops can figure out — with a good deal of precision — costs for cloud services and infrastructure like hardware and software. Where they sometimes get fuzzy is “the human side of their expense structures,” he said.

“Something that they often miss when they’re modeling a shift to [software as a service] or some other external variety of service is the ongoing staff cost of making use of that external service, which may be dramatically less than using the inside service or may not be depending on the specifics of the situation.”

Let us know what you think of this post; email Jason Sparapani, features writer, or find him on Twitter @jmsparapani.

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