What you're missing in your cloud ROI calculations

Microsoft's silly 'we'll save you 80 percent' claims show how too many businesses focus on the wrong cloud benefit

A recent Microsoft "study" claims an 80 percent savings by using the cloud. This news hit the blogosphere with a big splash -- it's another positive outlook for cloud computing, and it provides some pretty compelling reasons to move to the cloud.


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First of all, if I went into someone's office and claimed that I could save 80 percent on IT costs just by using the cloud, I'd get laughed out of the building. When you create studies like this, you tend to look at technology shifts in perfect worlds, and the perfect world does not exist.

However, this study misses the core reason to use the cloud. It's not the ability to share infrastructure in a multitenant environment, thus reducing infrastructure costs significantly -- we all get that. It's the ability to create an IT infrastructure and sets of systems that have the ability to change. The ability for cloud computing to bring agility to enterprises provides far more value than the mere sharing of hardware and software in some public cloud.

Most businesses ignore the value of agility when they do business cases for cloud computing because it's much more difficult to calculate the number of moving parts, and because "agility" is often associated with SOA (service-oriented architecture). Many who advocate cloud computing have no clue how SOA fits into the mix, so they miss a huge part of the puzzle. But if you want the complete picture to emerge from the puzzle pieces, you can take the business case from two angles.

First, there is the angle that using 10,000 servers that are shared with 500 companies is far cheaper than purchasing your own hardware and software and placing it in a rented or purchased data center. We've all heard the condescending power plant analogy, that's it's better to pay an electric company than use your own generator. This argument is beginning to seem both silly and redundant -- we get it, so move on.

Second, there is the angle that the true value of all this technology is the ability to quickly adjust your IT assets to take advantage of new business opportunities or to make adjustments to capture new markets. This means leveraging the cloud to allocate the resources you need when you need them, scaling up and down as the business requirements change. The value of doing this just one time typically outweighs any value around sharing resources.

Just think -- you can legitimately get both angles into your business case if you go cloud.

This article, "What you're missing in your cloud ROI calculations," originally appeared at InfoWorld.com. Read more of David Linthicum's Cloud Computing blog and track the latest developments in cloud computing at InfoWorld.com. For the latest business technology news, follow InfoWorld.com on Twitter.


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