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This content is part of the Essential Guide: Virtualization to cloud: Planning, executing a private cloud migration
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Tools that determine your cloud ROI

Companies adopt cloud under the promise of cost savings, but is that a reality? Providers aim to prove cost benefits with cloud ROI tools.

IT managers must balance two conflicting business drivers: modest budget increases and significant demand for more computing services. Cloud computing has the potential to meet those two desires, but executives are left wondering if a move to cloud is really cost effective. Vendors are responding "Yes" with tools to help prove their case.

Cloud financial ratios are not widely understood by IT leaders, with many adoption decisions based on rudimentary, incomplete data or without any financial data at all.

Milind Govekar,
vice president, Gartner Inc.

With technology becoming more complex and its use more widespread, a CIO's role is morphing from technical guru into chief financial officer. Increasingly, CIOs are searching for ways to link IT investments to the corporate bottom line. Since cloud technology is new and its reach is quite broad, making that connection has been difficult when companies started to dabble with cloud services.

"Cloud financial ratios are not widely understood by IT leaders, with many adoption decisions based on rudimentary, incomplete data or without any financial data at all," said Milind Govekar, vice president at Gartner Inc. "As a result, many companies are only now realizing they have over-provisioned virtual machines for private cloud or over-purchased licenses for public cloud initiatives, resulting in lower ROI for their cloud projects."

Cloud vendors as well as start-up suppliers have begun delivering tools to help companies be sure that cloud services make financial sense for them. With these tools, enterprises can compare the cost of running an application in the cloud to running it on an internal server -- or compare costs across different cloud services. Interest in these services is quite high. In fact, 451 Research LLC found that revenue for cloud ROI tools grew to $200 million in 2012, up from $129 million in 2011.

Some of these cloud ROI tools come from cloud vendors. Amazon Web Services (AWS) offers a Total Cost of Ownership calculator that presents companies with a sample accounting for each of its services. The calculator asks about the client's Web servers, database servers, storage, data growth rate and IT administrative costs and then produces reports that compare either the one-year or the three-year expenses associated with a cloud service and an on-premises option.

Microsoft's Windows Azure has a similar calculator, which was designed by marketing company Alinean. The service translates existing on-premises workloads into Azure servers and allows executives to export the results into Excel spreadsheets for further analysis.

Third parties have also developed cloud ROI systems. Apptio builds modeling and analytics tools to help enterprises determine how much bang they are getting for their IT buck. Apptio Cloud Express, a free service, allows businesses to track the usage and costs associated with AWS, Windows Azure and Rackspace services.

Astadia, a cloud computing systems integrator, developed the free IT Cloud Transformation ROI Calculator for services. The program accounts for software applications, servers, data center expenses and back office functions when determining the potential ROI from a move to the cloud.

While these tools offer companies guidance, they do have limitations. To date, most of the products work with only one cloud service. As a result, corporations are not able to gain experience with a tool and then apply it to a number of cases.

There are also concerns about the calculations. For instance, a calculator may look only at hardware costs and not include software licensing beyond the basic operating system or personnel costs associated with overseeing a cloud service. As a result, users often need to add vendor consulting services to get a true picture of what the cloud offers them.

About the author
Paul Korzeniowski is a freelance writer who specializes in cloud computing issues. He is based in Sudbury, Mass., and can be reached at

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