Is Your IT a Cost Centre or Strategic Partner?

The value of cloud technology can be a hard thing to quantify – let alone communicate to others.

Every company has its own ideas on how best to determine cloud ROI – for many, it’s capital expenses (CapEx) vs operational expenses (OpEx).

What we’re referring to here is that housing your own data centre requires capital expenditure, while using an external cloud service that offers pay-as-you-go service falls into ongoing operating expenditures.

While operations teams may find the CapEx vs OpEx discussion a no-brainer, the average IT department invests more than half (55 percent) of its technology budget on maintaining business operations and only 19 percent on building innovative capabilities.

IT: A cost centre or strategic partner?

Adding to this complexity is that CIOs often face the challenge of IT being considered a cost centre rather than a strategic business partner – and while the reliance on IT to help support business transitions during COVID has begun to shift this perception, there is still a way to go here.

If a CIO cannot successfully communicate ROI on IT investments to the rest of the C-suite, that’s a problem.

Not only is it difficult to articulate the ROI here, there’s also a lot of moving parts IT must ensure they’re considering before beginning the conversation with their peers.

For example, often the value of the cloud scales with the value that its agility brings to your business. The faster you need to change, the more valuable it will be.

What can be more difficult to quantify is the value of projects that are started, only to be stalled or placed lower on the priority list because by the time the resources are provisioned three to six months later, other initiatives have taken priority. With the agility of the cloud, projects can be conceived, provisioned and developed within 24 hours – allowing for real-time planning and execution.

In order to uncover the real costs and benefits of the cloud, The Doppler from HPE recommends keeping the following themes in mind:

1. Cloud delivers both tactical and strategic value – so analyse hard and soft costs separately.
2. Quantify the value of agility as it may be your greatest overlooked driver for cloud adoption.
3. The value of cloud varies greatly depending on the enterprise and the industry. While some companies achieve near 50% cost savings, others only achieve 10%. This is typically a good indication that value is there and must be explored
4. Focus on economics early in the cloud adoption journey and involve members of the financial team throughout the analysis. Organisations that are proactive in identifying their cloud ROI streamline their cloud initiatives and achieve greater success.

In addition, it’s also important to identify what the key drivers are for your organisation to adopt the cloud:

• Is there a mandate to reduce costs?
• Are you losing market share to competitors because of your inability to rapidly develop and deploy applications?
• Have you experienced outages that are damaging your reputation in the industry?
• Are you in need of more advanced, and cheaper, business continuity and disaster recovery capabilities?
• Are you interested in expanding your global footprint and nervous about the latency in your current environment?

As you can see, this area can be incredibly complex with many different elements needing to be considered. In our experience, partnering with someone who lives and breathes this space, can really help you navigate through this.

For more on this topic, please read “The Cloud Explained in Fewer than 400 Words” and “CloudOps – The Cloud Operating Model“