As we reach the midyear point, it’s a great time to step back and evaluate the cloud computing investments you made earlier this year. Unfortunately, most business owners — especially those with limited technical expertise — have a hard time understanding cloud ROI. To give you a hand, this guide will walk you through the basics of cloud ROI and how to determine if your investment is delivering the results you expected.
What is cloud ROI?
ROI, or return on investment, is a metric used to measure the financial gain or loss relative to the investment made. In the context of cloud computing, ROI represents the costs of cloud services compared to the benefits your business gains. These benefits could include reduced IT costs, improved productivity, and enhanced security, to name a few.
Key factors to consider when measuring cloud ROI
To accurately calculate the ROI of cloud services, you need to consider a variety of tangible and intangible factors:
Investment and maintenance savings
A major benefit of cloud computing is the elimination of traditional costs such as purchasing and maintaining physical hardware. Additionally, cloud providers manage tasks such as updates, system maintenance, and security patches, reducing the workload on your IT team. These savings are often the easiest to measure, providing a clear view of how quickly you can see a return on your investment.
Productivity through flexibility
One of the cloud’s most significant benefits is its ability to enhance employee productivity through:
- Real-time data access: Your team can collaborate from anywhere, cutting down decision-making time.
- Streamlined workflows: Automated processes and easy-to-use tools speed up workflows and minimize human error.
- Outsourced maintenance: Providers handle routine updates, allowing your IT team to focus on strategic projects.
- Faster implementation: Cloud solutions are often deployed in days or weeks compared to months for traditional infrastructure.
Such productivity boosts lead to greater efficiency, allowing your business to get more done with fewer resources, which ultimately translates to higher profitability.
Scalability
Cloud computing, unconstrained by hardware, scales quickly and easily to meet business needs. During peak periods, such as sales seasons, you can easily scale up to manage increased traffic without the delays of infrastructure upgrades. When demand subsides, you can just as easily scale down, ensuring you only pay for the resources you actually use.
Enhanced security
Cyberthreats represent a significant cost in investment, disruptions to productivity, and ensuing compliance fines. Fortunately, cloud providers heavily invest in state-of-the-art security measures, such as:
- Data protection: Robust encryption, multifactor authentication, and automatic backups help safeguard your data against cyberattacks.
- Disaster recovery: With built-in redundancy and recovery features, cloud environments help your business bounce back quickly from unexpected disruptions, restoring productivity.
How to calculate cloud ROI
Now that you’ve explored the key factors, here’s how to check your numbers:
Step 1: Calculate your total costs
Account for all expenses related to cloud adoption, such as:
- Subscription fees for cloud services
- Migration, setup, and integration costs
- Ongoing maintenance and training expenses for your team
Step 2: Estimate the benefits
Quantify the improvements your business has seen, including:
- Tangible savings such as reduced IT infrastructure costs and employee time saved
- Revenue impact from improved productivity or additional services powered by the cloud
Step 3: Compare the numbers
Subtract your calculated costs from your estimated benefits, then divide by the total costs to arrive at your ROI. A positive ROI shows your investment is delivering results. However, if your ROI appears low or negative, consider revisiting your cloud strategy.
It should look like this:
Cloud ROI = [(Total benefits from cloud − Total costs of cloud) ÷ Total costs of cloud] × 100%
For example, if your business saves $50,000 in annual IT costs and generates an additional $20,000 in efficiency-driven revenues, but the annual cloud expenses total $40,000, then:
ROI = {[($50,000 + $20,000) − $40,000] ÷ $40,000} × 100% = 75%
A 75% ROI signals that your cloud investment is delivering value.
Is your cloud investment living up to its promise?
Your cloud ROI isn’t just about numbers. It’s a reflection of how well your cloud services align with your business goals. If you’re not seeing the results you expected, it might be time to reassess your provider or adjust your usage patterns.
Need help optimizing your cloud performance? Our team at Refresh Technologies specializes in creating tailor-made strategies to maximize the value of your cloud investment. Contact us today to explore how we can help you achieve more with less.