RoI Around the Cloud


Added 14th November 2011

Which type of cloud it is - public or private - has a bearing on what to expect from your investment


Before we begin the discussion on the RoI (return on investment), let us understand the type of cloud model that is under consideration.

If it is a public cloud (off premise) then we will be paying for usage of service on pay- as- you- use basis with no or minimal up-front investment costs. You can scale up or scale down the demand of service as found necessary.

If it is private cloud (on premise), then the solution is internally deployed in the organisation using components such as virtualisation software, servers, network, storage, etc. Here, there is a considerable one-time investment.

For measuring the RoI in a public cloud scenario, we need to consider mainly the investment and the gains derived from either type of cloud deployment.

In case of private cloud, we need to consider various cost factors including funding for capex for hardware, software to deploy cloud and disaster recovery, physical infrastructure including office space, network links, air-conditioning, access control, UPS, etc. It must also include the costs of people, power consumption, support from vendor/implementation partner, annual maintenance, etc. Cost of underutilised or idle resources should also be factored in.

For public cloud, the cost picture is not very complex. While the opex for use of cloud services is the major cost;.we also need to look at the costs incurred on connectivity and devices required for using cloud service. We need to objectively evaluate the cost of business/revenue loss due to service performance, or/and breach of SLAs agreed by the cloud service provider. There may be other factors like data security, compliance risks, etc, that need to be taken into account.

The gains/benefits from for private/public cloud implementation are now generally known. These include:

a) Increase in revenues, profits and business opportunities due to quick service response with minimal turnaround time
b) Optimisation of expensive business space as one can work from anywhere, anytime
c) Optimisation of resources including computing storage, memory, etc.
d) Dynamic provisioning, de-provisioning of servers and other resources
e) Significant savings on energy costs, long cycles of hardware refresh, and incurring capex
f) Sharing of virtual desktops between multiple users
g) Committed performance, secured and compliant environment (for private cloud)

Pricing criteria
There are several key factors that need to be looked at from the pricing aspect. The first and most important factor for private cloud is sizing of the hardware required for deployment. The common factors to be considered for both private and public cloud models are SLAs, disaster recovery arrangement, data security, software licenses, application migration, committed bandwidth, support and availability of skilled resources, etc.

Procurement pattern
There are a number of steps in the procurement process. Each one is very critical and one needs to follow them with sufficient time supported by a dedicated team. These steps include solution identification, evaluating business benefits, carrying out proof of concept, referring to case studies and price negotiation in line with the expected RoI. Also, factors like vendor experience and reputation; their commitment to support during and after deployment; coordination between multiple vendors; relationship with the vendor; etc., are equally important factors.

Challenges in adoption
It is always advisable to anticipate and prepare for the challenges, particularly while deploying new technology. The likely challenges while working on a cloud solution are managements attitude towards investing in new technology and adapting to it, skill available, and knowledge of vendor team, sizing and configuring the solution as per the requirements. Besides this, coordination of multiple vendors, compatibility of applications that are planned for migration, complexities in licensing of software on cloud, readiness of physical infrastructure, change in the mindset of end users and their acceptance and usage of cloud service too form the challenges.

Success speaks
There are a number of glowing examples of public cloud implementation. Apart from big names like Amazon, Google, Microsoft and SAP, there are many other big, medium and small size organisations that offer public cloud service in India and globally, in different areas like IaaS (Infrastructure as a Service), PaaS ( Platform as a Service) and SaaS ( Software as a Service). KPIT Cummins is one of the early adapters of cloud technology. We have successfully deployed private cloud and are reaping its benefits. We now have 700 virtual desktops across our offices and another 500 will be operational by October 2011. We have also successfully migrated several corporate applications like Service Desk, CRM, Project Management, SAP Portal, Active Directory, Microsoft Exchange 2010, Configuration Manager, etc., to the cloud platform. A few more are in the pipeline.

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