Cloud ROI is the measure in cloud economics of the impact a cloud investment has on an organization.

For most businesses, return on investment (ROI) is a success indicator for any project – signifying that a business decision led to a positive impact on the organization’s bottom line. The measure of ROI is simply the increase in the value of an investment over a period of time. If the financial benefit outweighs the original investment the result is a positive ROI.

Cloud ROI is impacted by initial outlay, the speed with which returns occur, and cost decreases that occur as a result of the investment. For example, moving to a public cloud provider decreases capital expenditures, but increases monthly costs. These are also impacted by resulting revenue improvements, product enhancements that enable prices to be increased, or the ability to scale more rapidly to meet peaks in demand that may otherwise have been lost opportunities.

ROI has both tangible and intangible components – a complete ROI picture must include factors such as overall corporate value, customer goodwill, and brand value in the marketplace, to name a few.

Some key factors when calculating cloud ROI include:

• Productivity. If cloud adoption enables the business to meet peak demands rapidly productivity can be enhanced and opportunities gained that might have been lost without cloud scalability.
• Leverage. A single cloud platform such as AWS or Azure can provide the organization with the basic infrastructure to manage many applications. The virtualized nature of cloud services enables resource sharing of VMs and storage pools between multiple departments, and a cloud providers multi-tenancy offers economies of scale that can make cloud services less expensive than on-premises servers and storage for many organizations.
• Pay as you go. By eliminating capital expenditures, organizations pay for only those cloud services actually used in a give time period. There is no need to pre-pay for infrastructure necessary to meet peak demands UNTIL those peaks occur, and then organizations only need pay for increased capacity when it is needed. The same is true of software licenses; only pay for those you need when you need them.
• Provisioning time. Since procuring and deploying new infrastructure in the cloud is virtually instantaneous, new projects can be launched immediately rather than waiting for hardware to be ordered, configured, shipped, and installed. This also has a strong impact on time to value since work can begin immediately upon project approval.
• Capital spending reduction. Migrating applications to the cloud eliminates the need to spend for on-premises infrastructure, as well as eliminating support and upgrade requirements. Lower costs translates to higher profitability and increased ROI.
• Access to new market. Faster delivery and lower costs translate to more competitive offerings, which can open the door to new customers and markets worldwide.
• Cloud risk management. Calculating the cost of project failure, infrastructure outages and natural disasters, as well as ways to mitigate them, via disaster recovering solutions.