Understanding the ROI of Cloud Computing

Reading technology publications, you would think cloud computing is the silver bullet for all of IT's ills. In reality, cloud is a sourcing model that allows IT to decrease costs by leveraging third party services for commodity IT products like email, testing infrastructure and tier 3 storage and archival.

For all the cost savings and flexibility cloud delivers, it creates complexity when it comes to tracking the cost of services across IT, managing the increasing number of vendors and service providers and ensuring that cloud services are providing the highest ROI to the business. Apptio's Technology Business Management solution helps organizations understand the costs and benefits of Cloud Computing and tracks the cost of IT Services provided from the cloud over time.

Evaluate and Decide on Third Party Suppliers

Cloud computing allows IT to scale capacity up or down quickly, delivers a more financially agile cost structure, allows IT to outsource commodity IT products and services and can help reduce cost. However, to fully realize the promise of cloud, IT leadership must be able to cost out internal IT products, identify areas where cloud could help and then measure the ROI of the transition to ensure projected cost savings become reality.

Apptio's IT Service Costing, IT Benchmarking, and IT Service Performance applications enable IT to determine the fully loaded of existing IT products and services and their top cost drivers and to compare those granularly with alternative sourcing providers. Multiple What If scenarios can be run to compare similar cloud services and determine which delivers the lowest long term TCO. After a decision has been made, targets and timeframes for seeing ROI can be set and objectively measured to make sure projected costs savings are realized.

This process helps IT answer questions like:

• Which IT products or services are the best candidates for moving to the cloud?
• Which cloud provider has the lowest one, three and five year TCO?
• What are cost and service level trade-offs that I am willing to make?
• How does the move to cloud affect existing unit rates or Capex to Opex ratio of IT?

Accelerate the transition to a "Private Cloud"

Many IT organizations are beginning the cloud journey by creating internal virtual private clouds. This initiative calls for IT to prepare to leverage cloud computing more broadly by consolidating, virtualizing and simplifying internal application portfolios. Managing the cost and quality of the IT service portfolio throughout this change is essential to ensure that all technology decisions being made have the right business context.

With the right cost, quality of service and consumption data, IT can better decide:

• Which applications should be rationalized or virtualized first?
• Which datacenters can be consolidated and what is the TCO of the consolidation?
• What is the effect of virtualization on unit rates and how does this impact the business unit billing?