Proving Cloud Value to Justify Spend

In our rapidly-changing world, cloud adoption is becoming a necessity, with companies of all sizes migrating to the cloud. According to GlobeNewswire, the industry is expected to grow by 17.5 percent over the next five years, totaling $832.1 billion by 2025.

Despite the need for cloud adoption, many organizations are finding it difficult to justify the costs associated with cloud usage. In fact, a recent article from McKinsey found that enterprises estimate that 30 percent of their cloud spend is wasted. What’s more, 80 percent consider managing cloud spend to be a challenge. This is true for both large and small organizations, and it can cause particular issues for companies operating on limited budgets. 

While wasted spend is certainly an issue, it can be avoided with careful planning and resource management. If you’re looking for ways to prove cloud value, focusing on a few key areas can help. Below, we’ve highlighted tactics that can minimize value leakage and optimize your use of resources.

Identify Benefits Offered by the Cloud 

Cloud adoption often comes with significant benefits, including streamlined workflows and added flexibility. Identifying and communicating these advantages is one of the best ways to demonstrate value for cloud spend, and they can help you call attention to how cloud usage has improved efficiency within your organization. 

Keep the following in mind when outlining value derived through the cloud. 

  • Focus on productivity: With its flexible infrastructure, the cloud can reduce inefficiencies and allow your team to automate certain processes. In turn, this can free up time for more complex tasks and cut costs associated with other types of resources, including headcount. 
  • Emphasize the benefits to remote work: As companies continue to navigate the challenges brought on by COVID-19, cloud adoption makes it easier to create an accessible work environment for teams of all sizes. This can simplify cross-functional collaboration and eliminate many of the problems caused by shifting from in-person work to remote work.
  • Personalized solutions: One of the other benefits provided by the cloud is the ability to customize solutions to your specific needs. In addition to boosting efficiency, this can help you pivot your business as you grow or expand to new markets. 

Showcasing the benefits provided by the cloud is a great first step in proving value. It can help you quantify the direct impact of the solutions you’ve adopted and how they’re shaping your business. It can also be a great way to identify what’s working well — and what may need to be improved.

Calculate Spend Against Return On Investment

Another way to prove the value of your cloud spend is to determine how your investment compares to your return. On the surface, this is a fairly simple calculation using the following formula:

ROI = Investment Gain / Investment Base 

So, for example, if your cloud spend averages $100,000 per year, and the revenue gain associated with that spend averages $250,000 per year, your ROI calculation would look like this:

ROI = ($250,000-$100,000) / $100,000 = 1.5 or 150%

Be sure to take indirect gain into account as well, to the extent that you’re able to. Productivity gains, improvement in morale, and decreased down-time can all result from cloud investment, but aren’t necessarily captured when an organization focuses solely on revenue generated by cloud-facilitated activities.

So although ROI is unlikely to capture the full impact of cloud at your organization, it’s still an incredibly useful metric. It can provide a window into roughly what you’re spending, as well as roughly what you’re gaining from that investment. Conversely, if you can’t find an ROI at all from this baseline calculation, that’s a good sign that you need to pinpoint a more accurate spend target and forecast against it. 

Highlight Flexibility and Scalability

One of the other benefits of cloud adoption is that it can make it easier to scale your organization. Compared to on-premises solutions, which need to take into account both your current and future needs, cloud computing allows you to build an ecosystem for your current requirements, while providing you with the ability to expand as consumption grows.

If you were to build that infrastructure directly, you might end up utilizing only 50% of it, potentially requiring you to reconfigure it as your company grows. By adopting a cloud ecosystem, you can maximize your usage and maintain the flexibility you need to make changes over time. 

Understanding Cloud Adoption Value

The COVID-19 pandemic has led to significant changes in the way we live and work, and it has emphasized the importance of agility in the face of ongoing changes. Cloud adoption makes it easier to adapt to those changes and to meet shifting consumer needs. 

While many companies find it difficult to manage their cloud spend, getting value out of the cloud comes down to careful planning and working with the right partner. When done correctly, cloud adoption can help you streamline your workflow, cut unnecessary costs, and scale your business. The key to making the most of it is to ensure that you’re carefully tracking your consumption and making adjustments as your needs change. If you’re working with a third-party vendor, it’s also important to make them aware of your needs in real-time so that they can plan accordingly.

Although using the cloud effectively requires careful monitoring and forecasting, cloud service providers (CSPs) are continuously building tools to analyze past consumption and predict future requirements. By developing a solid understanding of your needs and identifying how the cloud can help your organization succeed, you can prove the importance of cloud adoption and justify the spend needed to make it work for you.

For a closer look at how Simpat can help you optimize your cloud usage, connect with us for a personalized consultation.

Share on twitter
Share on linkedin
Share on facebook