For many years, IT solution providers have used cost savings – be it price breaks, increased productivity and lowered downtime, efficiency over end-of-life technology – you name it, to pique customers’ interest during technology sales. But using that lure with cloud can be risky, and in a recent article on InfoWorld, columnist David Linthicum explains his perspective on why ROI is a no-no when it comes to cloud pitches.
In a nutshell, he lays out the challenge as such: “Cloud computing avoids hardware and software investments, and because you pay only for the resources you use, the cost of those resources should align directly with the amount you require. Those assumptions sound great, but the resulting ROI calculations are drastic oversimplifications of the problems the cloud is there to solve. In fact, these ROI calculators confuse businesses about the real value of the cloud and mislead both IT and business units.”
To expand on that, I hear constantly that cloud saves money – Cut your CAPEX here! – and I worry that ROI is the value proposition too many IT providers are leaning on. Don’t get me wrong, cloud CAN save you money – in particular situations. Some customer will lessen their reliance on the infrastructure investments already made – which can lengthen the lifespan of those components. Customers just launching a business can avoid investing in hardware – or buying as much as they used to need. Storage costs can drop; security costs may, too. But the bottom line is that ROI of cloud is highly dependent on the type of business using it, the kind of cloud they are using, and the role it plays within their business operations. Plus, if a customer is investing – note that word, please – in a private cloud, costs may actually increase. If a client is working on a hybrid model, all things may stay even as they save on in-house storage and security but pay for space in the cloud. Completely public cloud may save some cash, but how about the heightened security needs that customer may have to address? You probably don’t need more examples.
All in all, I agree with Linthicum: “The ability to determine the ROI of cloud computing is not a simple modeling exercise, as most people seem to think. To truly understand and calculate the business values of using cloud computing – public, private, or hybrid – requires a complex and dynamic analysis that is unique to the problem domain you’re trying to address. In other words, the value of cloud computing depends directly on the type of business, the core business processes, and the specific problems you’re looking to solve. Additionally, you need to determine how much value you truly get from the increased agility and scalability that are core benefits of cloud-based platforms.”
The lesson for providers – to understand and pitch cloud solutions on the true value of cloud. Its flexibility and ubiquity offer you a stable value to present customers of all sizes – just remember to consider where cloud can best benefit each client on an individual basis.