Rethinking cloud ROI: Come for cost savings but stay for agility

Companies are moving away from the traditional operations-oriented ROI model, and now look toward agility as the core metric to determine value. That’s clear in a new report called “How Enterprises Are Calculating Cloud ROI—And Why Some Enterprises Are Moving Ahead Without It,” from ISACA.

Although this is new to many enterprises and analysis firms, it’s not new to me.  I’ve written many blog posts since 2011 about the reasons to use business agility as a primary metric for calculating the real cloud ROI. It wasn’t just me, of course: Clearly the cloud experts were talking about agility and ROI. But enterprises were still focused on ops costs and capital cost avoidance as the primary metric.

As I’ve said many times, enterprises come to the cloud for cost savings but stay for the agility. Finally, that slogan seems to be gaining wider acceptance in the Global 2000 enterprises.

We’re going through the turning point right now. That’s very exciting, considering the fact that the cloud is not that disruptive when it’s just for ops saving. 

There are good tools and models for figuring out the ROI of agility that cloud computing can bring. I’ve done a ton of these models, and I can tell you that this is a very different measurement of ROI. Patterns such as the vertical market, the size of the business, and the degree of innovation need to be understood before you can understand the ROI of agility. 

But you can build reusable algorithms that you can take from domain to domain, and dial in historical metrics. For example, you could do so for companies similar to yours that have used cloud computing and have reached this level of ROI due to the agility that cloud has brought. 

Still, it’s difficult to find public case studies to prove ROI assumptions. So your ROI calculations are difficult to verify upfront. But you should proceed nonetheless. It’s important to understand that this agility-based ROI approach is a much more effective way to look at the value of cloud computing technology.

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The evidence is in: The cloud’s advantages are now clear to business

One of the likely outcomes of moving to the public cloud is altering how products are designed, a recent Harvard Business Review article shows. With cloud, there is closer collaboration between corporate IT departments and business units—sales, finance, forecasting, and even customer interaction. In fact, the HBR article shows that many IT departments have jointly developed products with their customers. 

Many report that new ways of writing and deploying software in the cloud encourage new types of faster organizational designs. The feedback loops enabled by cloud computing seem to allow direct interaction with the product producer, no matter if it’s a thing or software, and with the ultimate customers.

As the cloud technology advances, it’s becoming easier for companies to design and build products and services in cloud-based systems. This extends to sales and marketing as well. The cloud, in essence, becomes a common repository for the collection and analysis of new data. And it lets you take full advantage of the possibilities of tools such as machine learning, chatbots, internet of things, and other cool technologies that many in corporate America view as disrupters. 

What’s significant about this finding is that it’s in a mainstream business journal, and not from yours truly or other cloud pundits. It means the cloud has likely crossed the chasm between IT promises and actual results, and now produces real value for the business. Most important, the businesses know it.

As technologists, we quickly find the value of new technologies. We will deal with the next shiny objects because we’re trained to do that to stay relevant in our careers. However, there is often a huge gap between what the technology actually does and its proven value to the business. Only when the business sees the value can the technology be used for its full potential.

The cloud has proven itself to the business, for the most part. It’s now a systemic technology that is part of many business systems, and it now can move companies from followers to innovators—thanks to the agility and speed of cloud computing rather than any other aspect of this technology. 

The fact that businesses have started to use the cloud as a means of incorporating customers and partners into design, production, and sales processes means that customers feel integrated with the company’s systems and so are more likely to stay on as customers, as well as spend more money. We technologists saw that coming, but now the business does too. Prepare for the next wave of deepened cloud adoption as a result.

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SaaS-ifying your enterprise application? A quick-and-dirty guide

Lots of people called it SaaS-enablement, some call it SaaS-ification of software. Whatever you call it, more and more enterprises are looking to turn some enterprise application into a SaaS cloud application.

There are several reasons to SaaS-enable an internal application. Enterprises need to expose a software system to their partners and/or customers to better automate the business. Or, they are looking to monetize applications they view as having value to other companies.

Whatever the reasons, there are a few things to consider first. I call this the SaaS-ification reality check:

  1. Can you handle the SaaS? Many enterprises don’t understand what’s needed to manage a SaaS cloud service. You have created in essence a product, and so you need a roadmap of improvements you’re going to make, product management, product marketing, product support, etc. for the SaaS services to be any kind of success. If you’re not willing to invest that much, rethink this venture.
  2. Is the application in good enough shape to be made into a SaaS service? The truth is that when applications and databases are designed for enterprise use, they are typically not built with SaaS in mind. So, they may need to undergo significant refactoring, meaning rewriting significant portions of the application code or restructuring the database.
  3. What’s tenant management? Enterprise applications are written to support many users, but not many tenants. Having many users mean that you’re just standing up one instance of the application and database, even if you have thousands of users connected to that instance. Being multitenant means that you’re running many application instances, in their own application spaces, and each must be separated virtually but allowed to share hardware resources at the same time. This takes additional thinking and understanding because new users require their own tenant space, including their own part of the database, as well as the ability to use hardware resources at the same time as the other tenants.
  4. What about security and liability? If you choose to get into this business, you can’t be half pregnant. So, you need to provide sufficient security so hackers won’t run off with your customers’ data. That bring up another issue: liability. There is risk that your new SaaS service could be hacked, lose data, or have an outage that puts your customers’ business in the red. So, you need to ensure that you’re both protecting your customers and yourself.
  5. What about ops costs? SaaS cloud services are rarely built on the enterprise’s premises but are built and run from a public IaaS cloud. IaaS providers don’t give away their cloud services for free so you can charge for yours. So, make sure to understand the costs of the public cloud that will host your cloud. Typically, it’s much higher than my clients think. Also make sure you understand the all-in ops costs, including the people you need to operate the service, do the troubleshooting, and provide customer service.

Good luck!

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