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Aug 14
2012

How to Calculate ROI from Cloud Computing

Posted by: Adnan Raja in DRJ Blogs

Tagged in: Cloud Computing

Adnan Raja

In a business world that is embracing the cloud more and more every day, it is interesting to see that, while the cloud benefits companies in several ways, these companies seldom demonstrate their advantage from the cloud in terms of ROI (return on investment).  This may be because many of the benefits from cloud computing are intangible and may not be fully realized until further down the road.  

Therefore, to calculate returns from cloud computing, a business will most likely not employ the standard ROI calculations.  Instead, the company may use one of the following ways to determine ROI from cloud computing:

  1. Rate of adaption in the market:  With the flexibility that the cloud offers in terms of quick transitioning of capabilities, businesses can adapt to ever-changing market trends and therefore improve standing against competitors in the industry.  Consequently, increased revenue may be realized due to their ability to grab market share at an improved pace.
  2. Utilization and control of resources: The scalability of cloud computing allows businesses to avoid under or over utilizing resources, which in turn ensures effective capacity utilization and the avoidance of waste.
  3. Cost of ownership:  With little to no barriers to entry and the low skill level needed to configure and use cloud infrastructure, businesses can save the money that would otherwise be used for staff training, installation, and maintenance of the infrastructure.
  4. Growth potential:  As a business in today’s world, it is important to have room for growth.  Traditionally, if a business demanded additional resources (in terms of infrastructure and IT personnel), it may have taken weeks to acquire the infrastructure and to train/transition the staff.  However, with cloud computing, resources can be scaled almost instantaneously to accommodate the growing demands of the business.

Depending on the specific needs of your business, you may calculate ROI in any one of these ways, or another.  As you can see, it may be hard to quantify the returns on cloud computing, even if the benefits are quite substantial. 

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