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G O V E R N A N C E
HOW ENTERPRISES
A R E C A L C U L AT I N G
CLOUD ROI
And Why Some Enterprises Are
Moving Ahead Without It
CONTENTS
4 Cloud ROI Survey
4 / Key Findings
4 / Survey Methodology
13 Conclusion
14 Acknowledgments
ABSTRACT
Calculating anticipated return on investment (ROI) can be valuable when your enterprise
is considering moving to a cloud service. Likewise, calculating cloud ROI after cloud
implementation allows you to determine if your enterprise is employing cloud services
efficiently and, more importantly, ensures you are receiving the anticipated gains.
Despite the value in calculating cloud ROI, the ISACA Cloud ROI Survey reveals that
fewer enterprises are explicitly calculating cloud ROI than in the past. Although
the majority of enterprises continue to calculate cloud ROI, fewer enterprises are
performing that calculation. These enterprises cite a number of challenges, including
the lack of a reliable calculation model and increased investment that is justified
solely by nonfinancial business objectives.
This white paper outlines how enterprises are increasingly justifying their cloud
investment based on nonfinancial criteria, such as enhanced business agility, shifting
funding from capital expenses to operating expenses, or business cases that have
no specific specified financial outcomes.
Those enterprises that do calculate cloud ROI are taking the time to consider and
calculate tangible costs and intangible costs, such as employee time, and factor
them into their ROI calculations, whether in a quantitative, qualitative or hybrid model.
By calculating ROI, these enterprises can see clearly the costs and benefits of cloud
computing and if they are employing cloud services efficiently.
cloud investment improves efficiency, i.e., they are calculate ROI before cloud service implementation,
spending money to save money and better support and 58 percent calculate ROI after cloud service
2 Babcock, Charles; “Cloud ROI: Why It’s Still Hard to Measure,” InformationWeek, 4 August 2014,
www.informationweek.com/cloud/infrastructure-as-a-service/cloud-roi-why-its-still-hard-to-measure/d/d-id/1297746
collected anonymously through SurveyMonkey®. Figure 2 illustrates that the survey participants span
The total number of individuals who participated in across 20 industries; Figure 3 shows that participants
the survey is 102. Figure 1 summarizes the survey span all five major global regions.
respondents’ demographics.
21 % 18%
Technology Services/
Financial/Banking
Consulting
13%
100% Government/Military
N AT I O N A L /S TAT E /LO CA L
A member of ISACA
32%
14%
Europe
42% Asia
North
America
7%
Africa
E N T E R P R I S E S R E P R E S E N T E D B Y N O. O F E M P LO Y E E S
Which of the following, if any, best describes your Please select your region.
business category?
Europe 32%
Technology Services/
Consulting 18%
Asia 14%
Government/Military
NATIONAL/STATE/LOCAL 13% Africa 7%
6% Latin America 1%
Insurance
Oceania 1%
Manufacturing/
Engineering 6%
F I G U R E 3 : Global Regions
Retail/Wholesale/
Distribution 5%
Advertising/Marketing/
Media 4%
Health Care/Medical 3%
Public Accounting 3%
Transportation 3%
Utilities 3%
Pharmaceutical 2%
Telecommunications/
Communications 2%
Legal/Law/Real Estate 1%
Mining/Construction/
Petroleum/Agriculture 1%
Aerospace 0%
F I G U R E 2 : Industry Sectors
Implementations
Yes 78%
No 22%
Seventy-eight percent of the ISACA Cloud ROI Survey
respondents’ enterprises implemented cloud computing Don’t know 0%
Other 0%
Yes 44%
No 56%
How, if at all, does your enterprise calculate ROI for cloud computing?
Don’t know 0%
F I G U R E 7 : Percentage of Enterprises That Calculate Cloud ROI and Percentage of Enterprises That Do Not
3 Op cit Babcock
Lack of a reliable
If enterprises did not calculate anticipated cloud ROI calculation model 28%
before implementing cloud services, slightly more
than half of these enterprises justified their cloud Other 4%
investment based on nonfinancial criteria, such as
F I G U R E 8 : Reasons Why Enterprises Do Not
enhanced business agility and shifting funding from
Calculate Cloud ROI
capital expenses to operating expenses (figure 9).
indicate that they did not justify the cloud investment Investment If They Do Not Calculate Cloud ROI
Before Implementation
before cloud implementation.
Other 0%
The hybrid model and the quantitative model for
calculating cloud ROI are used most often by
F I G U R E 1 0 : Cloud ROI Calculation Methods
enterprises that report that they calculate cloud ROI
(figure 10).
Most enterprises use a time frame of one-to-five What time frame do you use to calculate cloud
years for calculating cloud ROI (figure 11). One computing ROI?
survey-respondent enterprise calculates cloud ROI
Less than 1 year 6%
over the life of the cloud-service contract.
1 to 2 years 36%
3 to 5 years 55%
6 to 10 years 0%
Don’t know 2%
You indicated that your actual received ROI after implementation differed from your anticipated cloud computing ROI value.
What caused the difference? Select all that apply.
Operational expenses
higher than anticipated 32%
Transition expenses
higher than anticipated 32%
Operational expenses
lower than anticipated 25%
Capital expenses
lower than anticipated 21%
Transition expenses
lower than anticipated 18%
Staffing requirements
higher than anticipated 11%
Staffing requirements
lower than anticipated 7%
Other — Additional
services were required to
achieve expected benefits 4%
Conclusion
When enterprises consider moving to the cloud, clear. The lack of a reliable, industry-standard
calculating anticipated cloud ROI is potentially valuable calculation model poses one such challenge. ISACA
for supporting their decision. Likewise, calculating cloud has, in the past, proposed mechanisms for calculating
ROI after cloud implementation allows enterprises to cloud ROI, for example, in the “Calculating Cloud ROI:
determine if they are employing cloud services efficiently From the Customer Perspective” white paper.4 However,
and if they are realizing the expected financial benefits without an industrywide consensus for cloud ROI
that they planned at the outset. calculation, adoption of a formalized model is
understandably stunted.
The initial response to—and perception of—a cloud
computing investment can either be that it is Another limiting factor is justification of the investment
expensive or that it represents a vehicle for large-scale solely using business objectives. Enterprises are
cost savings. Unless ROI is explicitly calculated in increasingly justifying their cloud investment based on
advance and used as a measuring instrument for nonfinancial criteria or on a business case that either
validating outcomes, the ability to refute or validate includes financial outcomes (without explicit ROI) or
those perceptions can be difficult. Despite the value does not have financial metrics. These practices
of calculating cloud ROI, this survey suggests that suggest that cloud services are expanding their appeal
more enterprises than in prior years are moving to enterprises in ways that are not tied to specific
ahead with cloud computing without performing this financial objectives. For example, cloud services enable
analysis. Potential reasons for not performing ROI users to access services from anywhere or from any
calculations include: device. As these features become more refined,
financial justification for investment may become less
• Technology practitioners are becoming more familiar
important to the overall value proposition.
with cloud computing.
• Detailed ROI calculations are deemed unnecessary to Despite this, enterprises that do calculate cloud ROI
validate investment. are taking the time to consider and calculate tangible
costs and intangible costs, such as employee time,
• Nonfinancial outcomes are increasingly seen as
and factor them into their ROI calculations, whether
sufficient to justify investment, regardless of potential
in a quantitative, qualitative or hybrid model. These
financial impacts.
enterprises are able to clearly see the costs and
Although the majority of enterprises do continue to benefits of cloud computing prior to investment
calculate cloud ROI at some point in the cloud and compare the anticipated outcomes with actual
implementation process, the challenges associated outcomes to validate that they are employing cloud
with the mechanisms available for them to do so are services efficiently and in a manner commensurate
with expectations.
4 ISACA, “Calculating Cloud ROI: From the Customer Perspective”, July 2012,
www.isaca.org/Knowledge-Center/Research/ResearchDeliverables/Pages/Calculating-Cloud-ROI-From-the-Customer-Perspective.aspx
Acknowledgments
ISACA would like to recognize:
Tichaona Zororo
Development Subject ISACA Board of Directors
CISA, CRISC, CISM, CGEIT, COBIT 5
Matter Expert Theresa Grafenstine Certified Assessor, CIA, CRMA, EGIT |
CISA, CRISC, CGEIT, CGAP, CGMA, Enterprise Governance of IT (Pty) Ltd,
David Casper
CIA, CISSP, CPA, Deloitte-Arlington, VA, South Africa, Director
CTO, Global Algorithmic IT Operations
USA, Chair
(AIOps) Company, Previous Co-Chair,
Christos K. Dimitriadis, Ph.D.
Open Data Center Alliance, USA Robert Clyde CISA, CRISC, CISM, Intralot, S.A.,
CISM, Clyde Consulting LLC, USA, Greece, Past Chair
Expert Reviewers Vice-Chair
Robert E Stroud
Chris Richter
Brennan Baybeck CRISC, CGEIT, Forrester Research, Inc.,
CISM, CISSP, Senior Vice President, CISA, CRISC, CISM, CISSP, Oracle USA, Past Chair
Global Security Services, Level 3 Corporation, USA, Director
Communications, USA Tony Hayes
Zubin Chagpar CGEIT, AFCHSE, CHE, FACS, FCPA,
Mike Saurbaugh CISA, CISM, PMP, Amazon Web FIIA, Queensland Government, Australia,
CRISC, CISM, CISSP, Consultant, First Services, UK, Director Past Chair
Security Alliance, LLC, USA
Peter Christiaans Matt Loeb
CISA, CRISC, CISM, PMP, Deloitte CGEIT, FASAE, CAE, ISACA,
Consulting LLP, USA, Director USA, Director
Hironori Goto
CISA, CRISC, CISM, CGEIT, ABCP, Five-I,
LLC, Japan, Director
Mike Hughes
CISA, CRISC, CGEIT, Haines Watts,
UK, Director
Leonard Ong
CISA, CRISC, CISM, CGEIT, CPP, CFE,
PMP, CIPM, CIPT, CISSP ISSMP-ISSAP,
CSSLP, CITBCM, GCIA, GCIH,
GSNA, GCFA, Merck & Co., Inc.,
Singapore, Director
R.V. Raghu
CISA, CRISC, Versatilist Consulting India
Pvt. Ltd., India, Director
Jo Stewart-Rattray
CISA, CRISC, CISM, CGEIT, FACS CP,
BRM Holdich, Australia, Director
Ted Wolff
CISA, Vanguard, Inc., USA, Director
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