Proving value from the cloud

How to kick-start cloud transformation by building a solid business case

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Migrating to the cloud is an investment in an organization’s future. Most executives realize the cloud brings increased speed and flexibility, but the benefits go much deeper. Be forewarned: to fully maximize those benefits, there must be a solid business case that supports migration to the cloud. A strong business case can be what helps secure larger budgets required to invest in sizable transformation—the change that truly moves the value needle for the organization.

To build a comprehensive and compelling cloud business case, we should first look at the value realization. The cloud value stream includes the set of activities that ensure financial benefits are planned, captured, tracked and utilized. The definition of true value is what remains after subtracting the detriments from the realized benefits. Let’s take a closer look at each.

Benefits

Cloud benefits include tangible outcomes, or “hard” benefits, such as increased speed and flexibility, elasticity, usability and performance. We often link these benefits to infrastructure and people and then measure value by assessing how fast the organization can pivot. How can cloud accelerate these moves and measure hard benefits?

Then there are also “softer” benefits. For example, having direct and instant access to new software innovation, rather than downloading upgrades or getting them shipped on traditional DVDs. For some industries, such as communications and high-tech, having immediate access to the latest technologies is critical to staying competitive and connecting with customers. Software innovation can be the fuel to keep the business afloat.

Access to the latest innovation can also give companies a first-mover advantage and help enable rapid expansion into new channels and partnerships. First entrants in a new market can harvest over 70 percent of new market share. It can also be an engine that yields ongoing value. For example, the video streaming industry adopted innovations such as elastic transcoding, content delivery networks, and high resiliency to improve customer experience and increase retention.

Detriments

Detriments minimize cloud value, so every business should strive to reduce them as much as possible. The up-front cost of transformation has always been a noted detriment. However, the cloud also helps enable cost reduction through lower IT management and maintenance costs. One CIO calculated that by migrating 70 percent of its application portfolio, the company would save $28 million in after-tax net benefits.

Another common detriment is risk exposure and the misperception that cloud adoption increases risk and therefore makes the cloud less secure. What many perceive as risks tied specifically to the cloud—security, integration challenges, implementation costs and compliance requirements—are real, but they are as true for cloud applications as they are for on premise applications. When it comes to security, the cloud is demonstrably more secure and significantly minimizes risk exposure, even for companies that are in compliance with stringent regulations like PCI or HIPAA. What companies can get from each hyper-scale cloud provider is a long and ever-growing list of attestations, certifications, standards and regulations to help ensure they are in compliance. Along with these assurances, each cloud provider employs hundreds of well-trained security professionals that plan, validate, monitor and secure the cloud ecosystem.

Making the case

By examining all dimensions—the cloud’s benefits and its influence on external factors, including the ability to create new revenue streams through new products and services—a company can develop a comprehensive cloud business case that extracts the most value from cloud investments.

While the return on investment calculation may dip in the first year, the ROI curve usually spikes up rapidly as the benefits realization kicks in by year two. Also, by modeling future returns, the business might “borrow” from such future returns and reinvest in the faster cloud transformation or additional cloud streams that align with well-balanced cloud adoption.

There is no denying the cloud adoption delivers diverse value to a transforming enterprise. But by formalizing a case for cloud adoption, a business can map out how to achieve maximum value in the shortest time from its allocated cloud investment.

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