Techniques for Measuring ROI in the Cloud

For service providers, measuring data collected within your cloud environment to calculate return on investment (ROI) is a comprehensive way to numerically visualize the benefits your company gains from offering compute resources to your end users. As in any business, it is important to recognize current revenue and learn where you can widen your profits. There are many ways that service providers can measure ROI. One method isn’t necessarily better than another, but a holistic view will give you a better idea regarding the profits your business is receiving.

CLOUD USABILITY

One way to measure ROI in the cloud is to assess the ease of which your end users can access business resources. This calculation uses the time it took for end users to access resources before a cloud solution was implemented and compares it to the time it takes for them to access resources using a cloud environment. It can be calculated as follows:

(Access time1 – Access time2) / Time to Implement = ROI for access to resources

Access time1 is the time it took to access traditional resources, Access time2 is the time it takes to access cloud resources and Time to Implements is the total time it took to implement your cloud solution.

Equally important to learning about efficiency, you can also measure increase in capability within the end user’s role. For example, support personnel that addressed 30 tickets per day prior to cloud resources can now address 40 tickets per day with their cloud resources. From this example, it is easy to see how speed of access and efficiency of use are two different measurements that can yield separate, yet equally important, ROI data. For this example, your would use:

(Ticket time1 – Ticket time2) / Time to Implement = ROI

Ticket time1 is the response time to support tickets before the cloud solution was in place, Ticket time2 is the response time to support tickets using cloud resources and Time to Implement is the overall time it took to implement your cloud solution.

INCREASED COST CONTROL

Measuring ROI as a direct result of tangible cost can reveal how the cloud has helped save your business money. This can be calculated using:

(Cost1 – Cost2) / Cost of Implementation = ROI

Cost1 is the cost of maintaining traditional infrastructure environments, Cost2 is the cost of maintaining cloud infrastructure and Cost of Implementation is the amount of investment in cloud computing infrastructure.

Taking into account increased margin is another component of this measurement that will bring to light other long-term benefits that might not be immediately reflected in ROI calculation based strictly on cost control. For example, purchasing additional infrastructure to accommodate your expanding customer base will show as an expense based on ROI calculated on cost control, but it will be reflected as an increase in margin as your business moves forward within the cloud service provider industry.

(Margin1 – Margin2) / Cost of Implementation = ROI

Margin1 represents the available profits based on capacity in a traditional environment, Margin2 represents the available profits based on capacity in a cloud environment and Cost of Implementation represents the overall investment in cloud infrastructure.

DYNAMIC USAGE

Analyzing dynamic usage within your cloud environment is yet another way to measure ROI. Service providers that invest in infrastructure can utilize data based on usage to project how their environment will be utilized in the future and prepare for changes. If your business is close to the over-allocated resources limit, it shows that your business is efficient. The danger of over-allocating is the potential for influx that can push you beyond a limit of available resources. By analyzing usage projections, you can anticipate these influxes and implement additional resources that accommodate for them. Dynamic usage ROI can be calculated as follows:

(Overprovisioned Revenue Potential – Physical Server Revenue Potential) / Investment = ROI

Overprovisioned Revenue Potential is profits that can be received by thin provisioning your cloud environment, Physical Server Revenue Potential is profits that can be received by fully provisioning traditional physical servers and Investment is the overall cost of implementing your cloud infrastructure.

A positive result represents excess capacity in your environment and a negative result represents lost revenue opportunity. While it is not good practice to come so close to overcapacity, this is one gauge that you can use to determine the overall potential and use of your cloud environment.

SCALABLE CAPACITY OVER TIME

Utilizing cloud as a means to provide resources to your customers is an efficient way for service providers to scale their capacity to match the needs of their end users. Ensuring that your environment can handle both peak and off-peak traffic provides your end users with an optimized cloud. Using data from your cloud monitoring system helps you make decisions about when to upgrade your infrastructure, which saves your business money as you scale to accommodate more end users. As a general guideline, your storage can be 70 percent full and still operate at full capacity to accommodate for high availability and failover. You can calculate your capacity by using:

Tangible Capacity – Tangible Usage = .3 +/- .05

Tangible capacity is the available capacity of your overall environment, tangible usage is how much storage is being used in your cloud.

If the number is at .25, you are operating at 65 percent capacity. At 70 percent, your business should consider expanding infrastructure. A result of 75 percent means that you need to expand your infrastructure.

Service providers can take steps to produce accurate ROI reports based on the use of data driven decisions in their business. It is not accurate to base the ROI of your cloud environment solely on its tangible costs. Implementing another method of measurement that takes into account all of the intangible benefits that come with this offering is as important as calculating the cost to determine true ROI.

Image Credit: Joie De Cleve