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Creating a business case for cloud computing has always been tough. And as cloud continues to evolve, putting its true value on paper won't become any easier in 2015.
Cloud technology often provides a great deal of value and quickly pays for itself. If you're concerned that your cloud business case is weak, then it could become a self-fulfilling prophecy. Some companies may not benefit from cloud or see the anticipated return on investment.
To build a strong cloud business case, it's important to consider these three issues:
- Cloud deployment data points suggest the value of cloud computing has morphed in new and unexpected directions. Initially, the cloud's value was allowing organizations to move from a Capex to an Opex model. Today, it's more about the cost of ownership and cost of risk.
- The business case for cloud computing varies based on the company type, and its existing and future IT resource needs.
- Cloud technology is less expensive than expected, but the discounted prices may not continue forever. Will cloud prices flatten out or even increase?
The metrics used to build a cloud business case today are different than those used in 2010. The focus is on reducing IT costs, while increasing productivity and agility. Reducing capital costs is still relevant in a cloud computing business case; however, the focus should be on other factors, such as the business agility that cloud brings to the game.
The value of business agility varies between companies. For example, a high-tech or financial company could find more value in changing or expanding business process automation than a paper manufacturer in the Midwest.
Getting to know your business
Before creating a cloud business case, you must understand your business and its needs. Does your company place a premium on the ability to change and expand IT assets? What has IT done well to automate the business and where does it need improvement?
To understand your business, you must also define value drivers, such as agility, business intelligence, cost savings, time-to-market, service to customers and service to employees. Assign a weight to each factor.
Next, consider costs. Evaluate the cost of cloud services subscriptions, migration, and new technologies -- such as security and governance -- which should be employed with the use of cloud-based technology. Also, consider the cost of hiring new talent to keep the clouds running. These costs are typically higher than expected.
Finally, consider the cost of risk. There is always risk when changing platforms. Cloud computing is no exception, both in terms of migration and production. Many put a higher cost of risk on the cloud for data breaches, but evidence doesn't support that claim. In fact, your cost of risk related to breaches could go down.
While complex, building a cloud computing business case is easier when you understand your business and its needs. Be realistic about the pragmatic value this technology will bring, and you'll be fine.
About the author:
David "Dave" S. Linthicum is senior vice president of Cloud Technology Partners and an internationally recognized cloud industry expert and thought leader. He is the author or co-author of 13 books on computing, including the best-selling Enterprise Application Integration. Linthicum keynotes at many leading technology conferences on cloud computing, SOA, enterprise application integration and enterprise architecture.
His latest book is Cloud Computing and SOA Convergence in Your Enterprise: A Step-by-Step Guide. His industry experience includes tenures as chief technology officer and CEO of several successful software companies and upper-level management positions in Fortune 100 companies. In addition, he was an associate professor of computer science for eight years and continues to lecture at major technical colleges and universities, including the University of Virginia, Arizona State University and the University of Wisconsin.
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