It’s a familiar scene in 2023. A CIO nervously presents the cloud migration status to the board of directors. After a quick flip through a dozen or so PowerPoint slides and a review of the budget that supports the projects, a few uncomfortable questions arise:
- What cost savings is “the cloud” returning to the business?
- Will those cloud cost savings pay for the cloud migration?
- How much money can we expect to save from the use of cloud computing moving forward?
These are valid questions for a business to ask about funded changes; there should be some business benefit from any investment an enterprise makes, whether installing solar panels or using a new supply chain automation system. The CIO is not dodging those responsibilities, but the board might need an updated set of expectations regarding the benefits the company will realize from cloud migration.
In the early days of cloud technology, the discussion centered on the cost savings from cloud computing. That turned out to be an incorrect metric. It only tells part of the value story, a part that is much smaller than many assumed, even today.
It was never about cost savings
A few of us have argued throughout the years that “cost savings” are a terrible way to define the value of cloud-based platforms. If that’s your only metric, you’re likely missing the point of even moving to the cloud. You’ll also confuse the hell out of your leadership and investors. If they look solely at the cost savings around cloud computing, they will not see the savings they feel they were promised.
Those discussions in the early days of cloud computing about capex versus opex, and overall operational cost savings were wrong. We needed to define the holistic value of cloud technology, but instead, we established the wrong metrics to sell the initial business cases and measure success.
It’s time to correct our bearings
Cost savings is a “hard value” with easy-to-measure and easy-to-define numbers. Business agility and speed to innovation are “soft values,” which are hard to define and measure. The most significant value of cloud computing is rarely found in cost savings, although they sometimes do occur; it’s about delivering the more critical business values of agility and speed to innovation.
Unfortunately, most people looking to submit a business case for cloud computing usually avoid the soft values and oversell the hard values. This approach creates confusion for both staff and leadership and has the future effect of creating false expectations about the value cloud computing will return. This is why CIOs are still responding to questions focused solely on cost savings when it never was about cost savings.
Today we need to focus on communication and education. To determine the actual value of cloud computing and how it should exist within a specific business, a solid business case must consider all the values of cloud computing, both hard and soft. This means understanding how to define metrics around the importance of speed to innovation and agility for your business, which will differ vastly from other businesses, even within your industry. The value that cloud computing brings to your enterprise is bespoke, and that bespoke nature results in the dreaded “It depends” response to questions about potential cloud costs and benefits until someone digs into the soft values.
Cloud computing business cases are still grossly oversimplified, and some are just wrong. They need to be corrected. I understand this may put many of you in a bad situation; you must change things in flight by redefining how funding exists and how future cloud projects should be evaluated. This means pushing back on the outdated questions listed above.
Good luck.
Copyright © 2023 IDG Communications, Inc.
Originally posted on April 14, 2023 @ 4:40 pm
