Global IT association ISACA has recently released a new white paper on the hidden costs of cloud migration and the tips to calculate cloud return on investment.
The five hidden costs that enterprises may fail to anticipate when moving quickly to cloud-based services, according to the white paper, titled "Calculating cloud ROI: From the customer perspective," are:
- Cost of bringing services back in-house due to regulatory change (e.g., stricter data privacy laws);
- Cost of implementing and operating countermeasures to mitigate risk;
- Unexpected expenses involved in initial migration of systems;
- Loss of internal IT knowledge providing competitive differentiation; and
- Lock-in with specific cloud provider or proprietary service model, which may slow down future adoption of open standards-based services.
"According to the hype, cloud computing makes it easy to offer IT users the same self-service that people love when they turn on their lights or air-conditioning -- it's limitless, on-demand and pay as you go," says Marc Vael, international vice president of ISACA. "But in reality, cloud computing is like every other IT innovation. Security, cost and complexity don't disappear -- they just need to be managed and accounted for."
Calculating ROI
ROI, short for return on investment, is one of several financial metrics often used to estimate the financial outcome of business investments.
ROI = (Gain From Investment - Cost of Investment)/ Cost of Investment
Where a ration greater than 0 (zero), meaning the return is greater than the cost, the investment may be considered beneficial.
An example of positive ROI as a result of cloud migration is CA Technologies, which uses a private cloud to enable resource pooling and on-demand and scheduled resource acquisition, and to support data center consolidation and standardization.
"Early in our deployment we consolidated 44 locations and were able to drive millions in real estate savings and in productivity gains, as well as a 25% reduction in budget," said George Watt, vice president of strategy, CA Technologies, who led the cloud deployment. "Yet, our newfound agility was the unsung hero. From our perspective, one of the most important steps in calculating ROI is ensuring second-order costs are considered so there is a legitimate understanding of the complete cost of cloud and non-cloud options."