This abstract was originally published as You’re Thinking About Cloud ROI Wrong — Here’s Why by Jeff Valentine on Forbes Technology Council.

 

The way we think about performance measurement on technology spend is wrong. In most business contexts, a “positive” return on investment (ROI) implies your earnings from an investment exceed the cost of that investment, but when we speak of cloud ROI, the “I” should mean something entirely different. Cloud ROI should measure return on innovation.

Some business leaders might argue that every initiative boils down to dollars, and dollars gained over dollars spent is how every business decision should be made. With all due respect to the profession, those with such a binary view are usually accountants. While they’re right (from a very academic standpoint), this assumes you have understood the benefits.

The real measure of value in both cloud infrastructure and cloud services from providers like Amazon Web Services (AWS), Microsoft Azure and Google Cloud Platform (GCP) isn’t naturally expressed in hard dollars. Instead, the cloud is such a fundamentally different way of operating a business that the benefits are often misunderstood and, when reduced to dollars, understated.

To calculate ROI traditionally, you would take the percentage form of the following: (amount gained – amount spent) / amount spent. The amount spent is pretty easy to understand, even in a cloud world, and third-party cloud management tools make it even simpler to understand these costs. But the amount gained is much more difficult to pin down.

 

Continue reading You’re Thinking About Cloud ROI Wrong — Here’s Why on Forbes Technology Council.

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