Cloud ROI and Implementation - A TechBlocks Solutions Guide

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Cloud ROI and Implementation -A TechBlocks Solutions Guide

The use of cloud computing is growing, and by 2016 this expansion will increase to become the bulk of new IT spend.


Cloud ROI and Implementation – A TechBlocks Solutions GuideThe use of cloud computing is growing, and by 2016 this expansion will increase to become the bulk of new IT spend, according to Gartner, Inc. 2016 will be a defining year for cloud as private cloud begins to give way to hybrid cloud, and nearly half of large enterprises will have hybrid cloud deployments by the end of 2017.1 What’s driving the growth? Research from Tata Communications notes 83 percent of enterprises are seeing unexpected benefits from cloud implementations, with “increased productivity” leading the way with 69 percent of respondents reporting.2

Despite the growth of cloud services adoption, challenges remain. A consistent problem for upper management is analyzing the ROI of cloud implementations that are necessary before approving expenditures and assigning staff. Another issue is uncertainty about the steps that should be taken before, during, and after implementation that will help ensure a smooth process.

This report will provide IT executives and upper management with a cloud roadmap covering:

» The challenges with measuring cloud ROI and the hidden “soft” benefits that must be considered to see its true value.

» Detailed steps to designing and implementing a sound cloud strategy including assembly of a team, development of compliance processes, and longer-term management.

of total respondents say that cloud-based collaboration tools help businesses execute faster than would be possible otherwise.64%


Improving Business Productivity and Measuring ROI in the CloudGains in productivity are frequently desired and achieved with cloud deployments, but they are difficult to measure. Management that needs to see the ROI of every initiative can find it challenging to accurately measure the ROI of a cloud implementation.

Before looking at the ROI of cloud deployments, here are some of the core benefits of moving services to the cloud:

» Mobility. People can access/share/manage information from any internet-enabled location. Work can be done remotely, questions answered quickly, and geographic boundaries are eroded.

» Continuity. If disaster strikes locally, your data and work can still be accessed remotely.

» Staffing. Employees enjoy the flexibility of remote work options. If a number one sales member is moving across the country, cloud services allow them to continue their job instead of going to a competitor. Retention and recruitment are transformed with cloud services.

» Standardization. Cloud services force other processes to become more standardized and uniform, while also being more flexible and dynamic.

» Automated. Simple portal-based automation allows new services to be included quickly and lessens the workload for IT.

» Agility. Simply put, “agility” is being able to do tasks, offer services, complete projects, and meet customer needs quickly due to the collaborative power of the cloud.

Gartner analyst Daryl Plummer discusses the difficulties in pegging traditional ROI metrics to cloud implementations, stating “ROI is usually a measure of hard monetary return on the use of products or services. “ He continues to say “The soft side of ROI is almost always underplayed or ignored entirely. However, with cloud computing, stipulating that a hard-money ROI will be achieved, in the form of savings, is likely to net you more heartache than cost break.” 3

Despite the well-known benefits of the cloud, there have been many private and public cloud failures. Gartner analyst Thomas Bittman recently polled 140 individuals that had private clouds in place, and asked them to identify what was wrong with their private clouds. 95% of the respondents indicated something was wrong. Commonly given reasons included; not changing the operational model to adapt to the agile cloud, focusing on only internal benefits such as cost instead of flexibility, and using the wrong technologies that might not fit the company’s strategy.

of total respondents report that cloud-based collaboration has the potential to improve business processes.58%


The Importance of ROIThe challenge with the cloud is to judge not only the hard cost savings (reduced IT infrastructure, electricity savings, IT time), but the soft costs as well. The reach of a widespread cloud implementation can be considerable, with downstream benefits such as faster time-to-market for services. More efficient processes due to the cloud can result in more productive (and satisfied) staff members, which lowers retention and retraining costs.4

Despite the difficulties, ROI still matters when it comes to the cloud. The C-level executives want some metrics tied to the expenditure of moving services and applications to the cloud. Calculating this “new ROI” requires some clever analysis.

There are several key considerations for measuring the “soft ROI” benefits of the cloud:

» Acceleration of the rate of change. Cloud implementations can greatly reduce the delay of time in implementing business decisions, making it easier to adopt or eliminate services or applications. When a time-sensitive opportunity presents itself, the company that can respond the fastest stands to earn first-mover advantage. To measure this in terms of ROI, it’s vital to estimate the value in being a more nimble organization and to point to projects or new markets that were opened through agility.

» Provisioning can occur immediately. Businesses that have scaling demand based on activity can provision cloud resources in minutes instead of waiting for IT to implement more servers. There’s an opportunity cost benefit here.

» Compliance improvements. Cloud platforms such as private clouds can keep data segmented from other users in order to meet compliance requirements. Penetration testing and continuous auditing performed by cloud providers offers greater visibility and compliance with standards including PCI DSS and HIPAA.5

» Improved access to new solutions. With a cloud infrastructure in place, a business has easy access to new solutions on demand. This flexibility has a quantifiable benefit in terms of competitive advantage and adjusting to new market demands as needed.

» Employee access and satisfaction. Cloud services allow staff members to operate anywhere there is an internet connection. This gives companies the ability to hire staff across geographic boundaries, for not only possible payroll savings but also the added context and experience found with regional staff. Such access can reduce stress and expense from commuting as well as increase productivity. Several studies indicate correlations between flexible workers and higher job satisfaction and organizational commitment.6

» Power outages aren’t work stoppages. Staff members armed with mobile devices can continue to work (or move locations) during power outages or disaster issues, as long as internet access remains working. Cloud hosting companies have more resources for redundancies and power systems.

Not all of these “soft” benefits are quantifiable in terms of dollars, but their value shouldn’t be overlooked when preparing a ROI report. The gains in business productivity are especially important, as they can transform an organization and staff members into proactive agents for change instead of reactive followers of the status quo. A business that moves most of its core functions to cloud-based services and platforms will enjoy a wide range of benefits that will typically outweigh any short-term implementation costs.

of executives agree that cloud-based collaboration stimulates innovation.

59%


Roadmap for Success - Designing the Right Cloud StrategyOnce the decision is made to move services to the cloud (after ROI values are computed), it’s prudent to follow a roadmap for implementation. Cloud services can transform a company, so due diligence time should not be spared. Every step outlined below is essential to seeing the full ROI benefits, encouraging widespread adoption, and meeting goals.


Put together a Qualified Team Create a Written Business Case and StrategyIt’s vital to have an executive stakeholder that has a vision of what the cloud should bring to

the company as well as the leadership skills to push all of the stakeholders. This individual must understand the various facets of the business on a small and large scale, so they can foresee the process and organizational benefits that can come through the cloud. They also have to be a trusted individual, one that the CEO relies on to guide the company while listening to IT’s technical concerns. This leader should drive several initiatives:

» Define a team (not just IT staff) that will be responsible for each stage of implementation. Finance, legal, IT, and even marketing need to all be involved.

» Undertake strategic planning to align the cloud with business goals such as improving customer service, reducing waste, or streamlining inventory management.

» The leader should be able to move from a strategic high-level phase to a more tactical phase involving senior IT, to a final operational stage.7

Crafting a business case is essential because it starts you on the road of measuring ROI. It’s an exercise in identifying what is wrong (and to what degree) and then justifying the cloud expense as a way to fix the problem. Key steps include:

» Defining what is not working. The project leader needs to work with the CIO and other IT staff to have a frank discussion about inefficiencies that should be fixed.8

» Identify and write out the individual company issues. Defining specific problems such as “remote workers can’t access invoices” or “marketing and sales aren’t collaborating on product requests” is vital before you try to sell upper management on the broader cloud benefits.

» Tie the business case back to the overall plan, with clear details on how cloud computing solutions will fix the problems. Here’s where you start listing costs and timeframes so you can measure any problems from business interruptions. Gauge the impact on service levels for functions that move to the cloud. Applications that are critical to the business and its reputation should experience little to no service problems during the transition.


Pick the Right Deployment and Service ModelMoving past the “why” for the cloud means a transition to the “what” in terms of the kind of cloud that best meets the needs laid out in the business case. This means selecting the right type of cloud environment, whether it’s public, private, or a hybrid model.

Some key considerations:

» Mission critical services are best suited to a private cloud environment that separates data from other tenants. Although some vendors are offering public clouds that are situated on hardware which is isolated, so the company has the benefits of the public cloud with added security.

» Off or on-site clouds can both be built. On-site clouds can resolve some latency issues, but they do involve higher CAPEX costs. Off-site clouds are provisioned by the vendor, so migration costs are usually considerably less.

» Consider a hybrid cloud approach for the best of both the public and private worlds. Businesses can maintain in-house storage for sensitive data while enjoying the scalability and agility of the public cloud.

» Most deployment decisions will be based on the type of business activity and costs. For example, payroll information with SSN #’s might be best suited to a private environment, while sales collaboration tools can reside on a public infrastructure.

» Choosing the right “service.” Cloud tools can be Software-as-a-Service (SaaS), Platform-as-a-Service (PaaS), and Infrastructure-as-a-Service (IaaS).

• SaaSmeansanapplicationorservicethatisrunningthroughthecloud.It’sasimpleroutethat requires little or no configuration and often has a “pay-as-you-go” scalable structure to adapt to business needs. Consider Salesforce as an example of a SaaS service on a multitenant architecture that is easily customized, simple to access, uses the consumer web. SaaS moves a company away from the management of IT infrastructure while being customizable and flexible to meet specific needs.

• PaaSasitsnamesuggestsprovidescompanieswithaplatformforthecreation,deployment,andmanagement of applications. This approach offers standardization and automation for improved efficiency and the ability to quickly develop solutions to capture market advantage. It can greatly reduce the efforts of developers and other related staff because it’s a ready-made software stack. Developers can focus on the applications themselves, giving them more time to make refinements and get applications to market faster due to predefined workload patterns.7

• IaaSisfurtherdownthestack,andfunctionsasthebedrockforcloudservices.Itismadeupofautomated computing resources with storage and networking functions that can meet elastic demand. Scalability can be achieved instantaneously with an IaaS structure, and companies can build their own virtual data centers without any of the capital costs. IaaS solutions such as Azure function as the base layer that is used to develop PaaS and SaaS applications. IaaS also removes data silos, expands visibility into redundancies and bottlenecks, simplifies management, and enables better resource utilization.

of organizations surveyed are running applications or experimenting with infrastructure-as-a-service.93%


Create Governance RulesReading through cloud computing service agreements is an essential step that should be completed while reviewing needs and expectations. These agreements will vary depending on the type of cloud deployment and the services provided. Some key considerations when viewing agreements from various vendors and considering internal governance policies:

» Agreements are often “cascading” meaning they take into account several parties and their potential impact on the QoE.8

» Consider internal policies such as those involving auditing, regulations, and geography and how they affect cloud service decisions.

» Determine what areas will be governed by the provider, including a priority order of the various requirements. You want to give up some control while still maintaining governance when warranted. Be sure to review governance policies in the cases of the suspension or modification of the cloud service.

» Ensure the agreement matches with overall expectations and goals. Will the agreement enable or hinder the reductions in cost, improvements in business capabilities and other goals laid out in the business case?

» Metrics and measurements about availability (SLA’s) should be detailed, including steps taken if metrics fall short.

» Compensation if the agreement fails to meet agreed upon numbers.


Compliance and Security ProblemsYou merely have to read the daily news to see the impact data breaches and hackings can have on company’s brand image. Consider the Target and The Home Depot breaches other high-profile incidents that exposed consumer information and caused severe headaches for management and IT. Cloud computing has its own risks, with data residing outside of the four castle walls of the company.

Some of the risks include:

» Reduced or loss governance of data

» Ambiguity in terms of who is responsible for the management of data

» Legal risks due to improper storage of information which is hard to manage without visibility

» Incomplete data deletion which can leave remnants of information and possible exposure to legal or brand impacts

» Failure of the business provider

» Behavior of insiders – a study of healthcare breaches found 12% were caused by malicious insiders.9

All of these risks should be discussed both internally and with the cloud provider. Another key issue that affects many companies in the age of globalization is the role of regional jurisdictions and data management. Many legal rulings have discussed the “where” of the cloud, so give heed to where your data flows and where servers ultimately reside.

It’s important to devise security policies that do not interfere with employees’ ability to get things done, especially when it comes to customers. Security cannot be so restrictive that it negatively impacts the customer experience.

of enterprises have a hybrid cloud strategy, up from 74 percent in 2014.82%


Integrate, Validate, and Manage the CloudAfter a solid business case is created, security concerns are addressed, and an implementation roadmap is laid out, it’s time to get the green light from upper management. Once this is obtained, it’s advisable to create a proof-of-concept team. This group should include:

» IT staff such as system admins, developers, and architects

» Representatives from various functional areas that will manage the expectations surrounding the implementation

A proof-of-concept is often demonstrated by illustrating the benefits of a move to the cloud for one functional area of the business. A scoring matrix is another tool that can show the relationship between business goals and the available technology. The proof-of-concept is a way to minimize risk while showcasing resource usage, metrics on the outcome, and any recommendations for improvement.

After the proof-of-concept is approved, it’s prudent to test the integration strategy with the understanding that not every solution should be migrated to the cloud. Consider the security, compliance, and usability requirements of each functional area to determine the best fits.

Once implementation is a “go”, further validation should be conducted to ensure the cloud services perform as expected in a test environment and that all of the affected processes work as intended. Other implementation steps to consider include:

» Verification of data recovery capabilities and migration of data of data is performing as expected

» Check integrations with monitoring and management solutions to ensure they are working properly and all of the promised reporting is available

» Create a back-out plan in case problems arise and you need to move out of implementation before customers are impacted

A well-constructed proof-of-concept can make implementation an easier transition.

of SMBs are looking to the cloud for collaboration.70%


Moving Forward Into the CloudsThe market potential for cloud implementations is massive, with the technology having the potential to boost productivity across $3 trillion in global enterprise IT spending (according to a McKinsey & Company report while creating new services and products for consumers.) The report details thoughts on disruptive technologies that include advanced robotics, genomic, the Internet of Things, energy storage, and 3D printing.10

According to a market report from IDG Enterprise entitled “2014 Cloud Computing Research,” there is disconnect between IT leaders thoughts on the biggest challenge for cloud implementation and line of business (LOB) leadership. In the research survey, IT leaders listed integration as the most pressing concern (46% marked as the top choice), while 37% of LOB leaders noted measuring ROI to be the top challenge.11 Leadership, as always is focused on ROI, and will want the soft metrics to see the true value of cloud solutions.

In large measure, the value of moving to the cloud depends on the business itself. What kind of company is it, what are its main processes, and what challenges are the company’s management trying to resolve are core questions that must be considered when looking at ROI. It is clear that the cloud can accelerate positive business results, especially among senior management. A Forbes study found 64% of all survey respondents say cloud-based collaboration tools help business execution for example time-to-market, faster upgrade cycles, and responses to competitive actions. For the “leadership” group of the survey comprised of C-level, VPs of IT and executives of departments, this number jumps to 82%.12

Executive SummaryThis buyer’s guide is intended to give managers insights into the value of the cloud by encouraging thought about the broader ROI benefits and by offering an implementation roadmap. Implemented correctly, cloud services can transform an entire business culture, moving it from a reactive state to one where decisions and collaboration occur proactively in real time.

Getting the most ROI out of a cloud implementation means across-the-board commitment to changing processes and adapting to a new collaborative environment. This is where the true ROI lies for the cloud – widespread changes to company culture and how work is done. Agatha Poon of 451 Research states it succinctly “The cloud isn’t really about technology, it’s about business processes and making them more efficient.”

Companies that are considering widespread cloud implementations should work with an experienced partner. A helping hand can help guide them through selection of a provider and integration, and help uncover the softer ROI metrics that determine the true value of the cloud.


Here are some key considerations for a successful implementation that produces high ROI:

» Talk to people on the ground. Understand the workflows of multiple departments to ensure the cloud capabilities can meet or exceed employees’ needs. Survey people on what they need in terms of access, control, and mobility, and make sure the selected cloud services can deliver.

» Promote automation and time savings. Identify the influencers within the come and show them how the cloud services can automated tedious tasks and allow them to work more productively and efficiently. Get the influencers on board to encourage widespread staff adoptions.

» Take a methodical approach. Pick a business area to move to the cloud (maybe customer service) and then judge performance metrics before moving another area. Fine tuning at each step will increase the value of every cloud implementation.

Each of these steps requires businesses to look at the related costs versus the benefits. Consider that many of the benefits of the cloud happen over long timeframes and can affect multiple business units positively.

Other key considerations from the buyer’s guide:

» Cloud ROI can and should be measured, as long as the various soft benefits such as gains in productivity and the value of innovation are included.

» Meeting the needs of a mobile Millennial-dominated workforce requires cloud-based tools that are flexible and enable instant collaboration.

» Following a set implementation roadmap is essential for cloud success. Carefully consider the broader business case for moving services to the cloud. Review the different deployment model options, compliance and regulatory implications, and test services thoroughly.

1. “Gartner Says Cloud Computing Will Become the Bulk of New IT Spend by 2016.” Gartner, 2013. 2. Eddy, Nathan, “Cloud Computing Reducing Costs, Improving Productivity.” eWeek, March, 2015.

3. McKendrick, Joe, “Does Cloud Computing Require A New Type of ROI Measure?” Forbes, April, 2014.

4. Babcock, Charles, “Cloud ROI: Why It's Still Hard To Measure.” InformationWeek, August, 2014

5. “Why Cloud Computing Security Is No Longer An Oxymoron.” Forbes, May 2015.

6. Kelliher, Clare, “Doing more with less? Flexible working practices and the intensification of work.” Cranfield University, January, 2010.

7. “Practical Guide to Cloud Computing Version 2.0.” Cloud Standards Customer Council, April, 2014.

8. Linthicum, David “3 secrets to creating a business case for cloud computing.” InfoWorld, February, 2012.

9. Jackson Higgins, Kelly, “Healthcare Data Breaches From Cyberattacks, Criminals Eclipse Employee Error For The First Time.” InformationWeek DARKReading, May, 2015.

10. Manyika, James, Chui, Michael, Bughin, Jacques, Dobbs, Richard, Bisson, Peter and Marrs, Alex. “Disruptive technologies: Advances that will transform life, business, and the global economy.” McKinsey Global Institute, May, 2013.

11. “Investments and Upgrades in Cloud Solutions Drive Business Agility and Innovation.” IDG Enterprise, November, 2014

12. “Collaborating in the Cloud.” Forbes Insights, May 2014.

Sources