Return on InvestmentReturn on Investment is a long-term measure

Cloud computing is essential for cost savings and increased productivity

For companies of all sizes, Cloud computing has become the go-to solution during the past 5 years. Although the desire to reduce IT costs is one of the main drivers, the issue of Return on Investment (ROI) should not be overlooked as this provides a longer term metric.

Of course, exact ROI can be difficult to calculate because some of the benefits are intangible, such as increased productivity or improved staff morale.

The two most important areas where Cloud computing can give returns are:

  • Cost Savings – pay only for what you use (pay-as-you-go model) and not the cost of investing in IT infrastructure up front as in past traditional models
  • Increased Productivity – Cloud applications enhance the business processes through efficiency and optimisation

Considerations for Calculating Returns

To calculate returns from Cloud computing you wouldn’t employ your typical accounting calculations as most of the benefits of cloud computing can be seen in the long run and much of it is intangible. Despite that, here are five ways to calculate ROI from Cloud computing.

  • Cost savings and rate of implementation – Reduce costs brought about by delays in decision making and quickly transitioning to new capabilities to keep up with market trends. Companies can rapidly improve their market position against the competition.
  • Total cost of ownership – No barrier to entry and low technical skill requirement. Cloud computing ensures that even small businesses can have access to advanced IT solutions. This includes savings through labour and expertise cost, maintenance costs, and of course installation costs.
  • Rapid and dynamic provisioning of resources – Cloud computing allows for the rapid provisioning of resources to scale for growth or reduction eliminating the need for new equipment or decommissioning of no longer needed ones.
  • Increased cost and margin control – Growth in revenue and opportunities allow companies to cater to new markets and widen their customer base for further growth and improvement. The scalability of Cloud computing allows for the avoidance of under- or over-provisioning of IT services which always ensures enhanced capacity utilisation and avoidance of waste.
  • Process improvement – Through on-demand solutions and shared services, companies can capitalise on the development of new skills and solutions. This leads to better business processes, which in turn ensure the company is lean enough to adapt to market changes and even see them as new opportunities for growth.

Although it is sometimes difficult to quantify the exact rate of ROI that a Cloud computing solution provides, it is still clear the benefits in terms of direct cost, efficiency and productivity are very considerable.

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