Return on investment (ROI) of using the cloud has recently become a popular topic of discussion, though not in a way you might expect. An interesting article by JP Morgenthal entitled There is no ROI in cloud computing presents the opinion that cloud services simply have no ROI. A second article by Joe Onisick entitled Private Cloud: It’s Not About ROI effectively repeats a similar message in the context of private clouds.
While both pieces appear controversial on the surface, they accurately portray that cloud infrastructure is not an investment – rather, cloud offers a way to displace or mitigate traditional large investments in favor of smaller recurring expenses over time. As JP Morgenthal suggests, calculating ROI in the cloud is similar to calculating ROI on a decision to eat out. Since eating out is an alternative to investing in a refrigerator full of food, you are averting an investment rather than making one.
So how does cloud storage fare in this ROI analysis? With cloud storage, the same ROI concept holds true. Cloud storage can indeed save you money when you are buying from a provider with greater purchasing power, more efficient data centers and shared, instead of dedicated administration. In fact, a recent article by Alex Williams cites a Forrester study concluding Cloud storage costs 74% less than running data storage in-house. However, there is no up-front investment to provide you a return.
Now you may astutely point out that sometimes there are capital purchases for cloud storage gear, such as cloud storage gateways or appliances. However, you are still displacing a much larger capital purchase with a smaller capital purchase and a monthly recurring bill. Effectively, a hybrid cloud storage solution reduces your up-front investment compared to traditional on-premise storage, In fact, if a hybrid solution does not reduce your investment, you may want to seek an alternative that does.
Overall, the case is quite compelling for purchasing data storage as a service. First, data storage is a depreciating asset – the cost of data storage drops significantly over time and, because you purchase through a cloud provider, you are always paying market rate for what you use instead of pre-purchasing at a premium. Second, you may realize increased IT agility using cloud storage. Enterprise storage is a major deployment effort. With cloud, you can add storage capacity in a matter of minutes, enabling your business to react faster to changing IT requirements. Having the option to subtract that storage at any time simply reinforces the agility story and is not an option with traditional data storage purchases.
But if there is no ROI for cloud storage, how can you ever convince your finance folks to move forward with it? Well, the answer lies in the opportunity cost of money that you would have put toward a significant capital investment. Perhaps that money can go toward your marketing budget or lead generation. Alternatively, the money might hire another sales resource that produces incremental revenue for the business — all while simultaneously reducing your 3-5 year total cost of ownership (TCO) of data storage.
In closing, if your on-premise data storage is at or near its capacity, consider its replacement cost. Now consider avoiding that capital purchase by using cloud storage instead — and do let us know how you decide to spend the capital you just freed up.