The Doppler Quarterly Special Edition 2019 | Page 40

Defining ROI and TCO in the Cloud
Return on Investment (ROI): The financial gain from an investment in cloud
divided by the cost of that investment.
Let’s first look at cloud ROI. While businesses often discuss their “cloud ROI,” more often
than not they’re missing the bigger picture. Most cloud ROI calculations are focused
around IT cost savings and how they affect the bottom line. Instead, cloud ROI should
be more about the value that is returned to the organization.
Value drivers that are often overlooked in typical ROI calculations include accelerated
time to market, improved developer productivity, decreased provisioning time and
many more intangible benefits of cloud.
Total Cost of Ownership (TCO): The sum of all direct and indirect costs of the IT
estate including all application development, maintenance and support, operations,
data center, network and BC/DR.
Cloud TCO defines what will be spent on the technology after adoption - or what it costs
to ‘run the engine.’ Typically, a TCO analysis looks at the costs of the “as is” on-premise
infrastructure and compares these costs with the costs of the “to be” infrastructure
state in the cloud. TCO analyses are much simpler to calculate than ROI analyses; how-
ever, they only give the stakeholders a narrow view of the total financial impact of mov-
ing to the cloud.
So, the difference between a TCO and an ROI analysis is that a TCO defines the spend-
ing and savings, whereas the ROI determines what value is generated, while taking
spending and savings into account. It’s critical that you understand both, and their dif-
ferences, in order to effectively define the full value of cloud for your business.
38 | THE DOPPLER | SPECIAL EDITION 2019