Delivering a Cloud Business Case Beyond CapEx and OpEx

Capturing the value of cloud agility can make all the difference to business leaders

Public Cloud

You can’t ignore it anymore — cloud is no longer an option, it’s a requirement. It will be the single most significant technology your company implements over the next decade, capable of transforming your entire business.

But no public cloud initiative can get off the ground without a strong business case. You’ll need to demonstrate that any cloud investment will return substantial value. A truly compelling case doesn’t stop at capital expenditure and operating expense — it goes on to illustrate the many other value drivers at play. Rackspace and Cloud Technology Partners (CTP) recommend that you focus on three key areas as you build your case.

Define cloud ROI and TCO

As CTP points out, when businesses talk about “cloud ROI” they’re usually referring to the bottom-line impact of IT cost savings. That misses the big picture — the overall value returned to the organization. True ROI includes often-overlooked value drivers such as accelerated time to market, improved developer productivity and decreased provisioning time.

“Cloud TCO” refers to IT expenses after cloud adoption — what it costs to “run the engine.” Traditional cloud TCO analysis compares “as is” on-premises infrastructure costs with projected cloud infrastructure costs — a measure of spending and savings. This is distinct from ROI, which determines total cloud value after accounting for spending and savings. It’s critical to grasp this difference if you want to effectively define the full value of the cloud for your business.

Capture hard and soft cost benefits

Cloud cost benefits aren’t limited to bottom-line dollars saved. Less tangible advantages such as enhanced communication and shorter procurement cycles are equally impactful. As you prepare your business case, Rackspace and CTP recommend thoroughly analyzing both hard and soft cost benefits.

Start by defining the hard benefits — visible cost reductions and efficiency improvements. Costs evaluated should include:

  • Hardware and networking costs
  • Planned and unplanned downtime costs
  • Upgrade costs
  • Disaster recovery/business continuity costs
  • Service level agreement (SLA) penalties
  • Deployment costs
  • Day-to-day operational support costs
  • Performance costs
  • Costs of selecting vendor software
  • Requirements analysis costs
  • Developer, administration and end-user training costs
  • System integration costs
  • Quality, user acceptance, and testing costs
  • Application enhancement and “bug fixes” costs
  • Physical security costs
  • Legal, MSA and contracting costs
  • Replacement and take-out costs

Soft savings from cloud technology are more challenging to measure, but these questions will help you identify and calculate them:

  • What is the impact of productivity in hours saved?
  • How much value does accelerated application development add?
  • Can you measure the impact of faster software lifecycles?
  • How much do human error and outages cost your organization?
  • What is the value of reduced security risk?
  • Can you quantify the value of increased job satisfaction?

This may take some work, but it will enable you to articulate expected outcomes, communicate them to stakeholders and benchmark the future success of your public cloud initiative. 

Quantify cloud agility

According to CTP, the business value of cloud technology is driven more by agility than anything else. Cloud agility refers to an IT infrastructure that rapidly adapts to evolving business needs — a huge strategic advantage. Cloud agility means provisioning and de-provisioning nearly unlimited resources as needed and dramatically accelerating strategic decision-making. It means rapidly entering new markets and easily accommodating new customers.

Rackspace recently helped three major businesses — Domino’s, Aeroméxico and Graze — move critical application workloads to the cloud, and all three are reaping significant business benefits as a result of newfound cloud agility:

Domino’s — Domino’s partnered with Rackspace to iterate its global online ordering platform. Rackspace built a highly-automated Microsoft Azure cloud solution that offered a new level of scalability, flexibility and agility and helped power Domino’s global growth.

Aeroméxico — Mexico’s flagship airline partnered with Rackspace to reinvent itself digitally and redefine the customer experience. Rackspace developed agile cloud infrastructure that powers and integrates the airline’s new website, web apps and digital airport kiosks.

Graze — This fast-growing snack food startup was struggling to scale cost-effectively and process massive amounts of customer data. Rackspace implemented agile, scalable cloud solutions that supported growth while providing powerful BDA capabilities.

Cloud agility is clearly valuable, but how do you quantify it? CTP recommends breaking it down into components:

Degree of change over time. This is the frequency with which a business reinvents itself to adapt to marketplace shifts. A legacy industrial company might only experience a 5 percent change in a five-year period, while a technology company might undergo an 80 percent change. A depressed market might force a midsize company into a 40 percent change.

Ability to adapt to change. This can be a make-or-break quality. A large manufacturer can’t rapidly pivot to seize a new market opportunity if its IT culture is too inflexible. Implementing disruptive technology like cloud computing won’t be an option.

Relative value of change. This is revenue directly resulting from business adaptation —e.g., sales increases from a retail firm’s rapid creation of a frequent-buyer program in response to changing market expectations.

If you want to help your organization reap the benefits of cloud, know that you’ll need to make a business case first — and the most compelling case will go beyond CapEx and OpEx to capture benefits like error avoidance and business agility. Before considering your case complete, make sure that you:

  • Document all metrics and information sources used to demonstrate value
  • Have a concise document detailing both hard and soft benefits to present to stakeholders as needed
  • Create a plan to reassess and revise as your project progresses

Rackspace has managed thousands of successful cloud migrations, and our experts can help you make a rigorous, compelling business case for cloud transformation.

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Eric Johnson is the AWS Evangelist at Rackspace. He has been working with AWS technologies as a developer and an architect for the last six years. His passion for all things new in cloud technologies drive him to be a lifetime student and fanatical speaker on all things cloud.

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