Road To Enhancing Your Roi
Wipro developed a Cloud roadmap for a global leader in digital interactive entertainment, enabling the client to shorten the time-to-market and lower costs by $4.04 million.
The client is a global leader in digital interactive entertainment. They deliver games, content and online services for internet-connected and offline consoles, personal computers, mobile phones and tablets. To retain its leadership position, the client was looking to invest in the right technologies, with a focus on cost control and rapid elasticity
The gaming industry has seen a proliferation of new players in the market. In the wake of heavy competition, the biggest challenge is to acquire and maintain a loyal game-following base and develop new concepts in shorter time frames. The industry is moving towards differentiation in offerings, through enhanced user experience and multi-channel gaming portfolios. Innovation is the key to keeping pace with rapidly evolving technologies while tackling rising cost pressures
Wipro engaged with the client to understand and analyze their current IT infrastructure, and identify the business opportunity in their IT landscape. The engagement was rolled out in three phases:
Wipro underpinned the benefits of migrating from existing IT systems to the Cloud:
Wipro recommended a cloud roadmap for the clients Game Studios. The engagement enabled the client to:
What Is Roi Used For
ROI can be used to evaluate various investment decisions, comparing them to their initial cost. Businesses also use ROI calculations when evaluating future or prior investments.
Individuals can calculate the ROI to judge their own personal investments and compare one investment — whether it is a stock holding or a financial stake in a small company — against another in their own investment portfolios.
The Use Of The Roi Formula Calculation
ROI calculations are simple and help an investor decide whether to take or skip an investment opportunity. The calculation can also be an indication of how an investment has performed to date. When an investment shows a positive or negative ROI, it can be an important indication to the investor about the value of their investment.
Using an ROI formula, an investor can separate low-performing investments from high-performing investments. With this approach, investors and portfolio managers can attempt to optimize their investments.
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What Are The Benefits Of Measuring Cloud Roi
You cannot manage what you cannot measure and measuring cloud ROI gives an organization the understanding of how a cloud project can impact the bottom line over a period of time. Since IT infrastructure investments often have a three-to-five year lifecycle, calculating the cloud ROI for a similar timeframe can demonstrate how substantial the payback can be for cloud investments made today. Migration cost can be demonstrated to translate into operational excellence, cost savings, and enhanced scalability, helping to green-light potential cloud projects.
Some benefits that can be realized as a result of determining a positive cloud ROI include:
- Reduced or eliminated software license costs
- Increased business agility and faster responses to business unit inquiries
- Reduced operational expenses no more servers or ancillary infrastructure
- Improved energy efficiency and reduced electricity bills
- Retiring of IT assets, racks, data centers, and real estate expenditures
How Do You Calculate Roi
There are multiple methods for calculating ROI. The most common is net income divided by the total cost of the investment, or ROI = Net income / Cost of investment x 100.
As an example, take a person who invested $90 into a business venture and spent an additional $10 researching the venture. The investor’s total cost would be $100. If that venture generated $300 in revenue but had $100 in personnel and regulatory costs, then the net profits would be $200.
Using the formula above, ROI would be $200 divided by $100 for a quotient, or answer, of 2. Because ROI is most often expressed as a percentage, the quotient should be converted to a percentage by multiplying it by 100. Therefore, this particular investment’s ROI is 2 multiplied by 100, or 200%.
Compare that to another example: An investor put $10,000 into a venture without incurring any fees or associated costs. The company’s net profits were $15,000. The investor made $5,000. It is significantly more than the $200 in net profits generated in the first example. However, the ROI offers a different view: $15,000 divided by $10,000 equals 1.5. Multiplying that by 100 yields an ROI of 150%.
Although the first investment strategy produced fewer dollars, the higher ROI indicates a more productive investment.
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What Are Examples Of Roi Calculations
Calculating the investment figures for each piece of the ROI equation can sometimes get complicated for businesses.
For example, if a company wants to invest in deploying new computers, it must consider a variety of deployment costs. The business needs to consider the actual price of the computers, tax and shipping costs, consulting fees or support costs paid to purchase, plus setup and maintenance costs.
Then, the business would need to calculate net profit over a set period of time. These net profits could include hard dollar amounts coming from increased productivity and a reduction in maintenance costs compared to the previous computers.
That business could then calculate the ROI when evaluating two different types of computers using anticipated costs and projected gains to determine which ROI is higher. Therefore, which computer represents the better investment: Investment A or Investment B?
The business could also calculate the ROI at the end of the set time period using actual figures for the total net income and total cost of investment. Actual ROI can then be compared to the projected ROI to help evaluate whether the computer implementation met expectations.
Shift In Roi Paradigm In Government Agencies
Even though most government agencies do not generate profits, the public continues to require more accountability in the expenditure of public funds. In public-sector agencies, Elyon has observed a shift in paradigm from activity-based to results-based accountability. One state client that Elyon worked with did not justify moving to the cloud based on ROI. Part of their digital transformation included going from paper processes to digital processes, and it was difficult to get baseline metrics to measure tangible benefits.
In terms of intangible benefits, the cloud migration resulted in decreased staff frustration and increased morale. This state client worked with a vendor to train staff to use the cloud-based document repository to digitally create, store, and access documents. This saved the client significant time because they were able to respond to customer inquiries much faster. In this instance, Elyon observed that this state client made more efficient use of taxpayer funds by migrating a manual process to the cloud and transforming it to a digital process, which enabled the state agency to be more agile in responding to the needs and demands of the citizens it serves.
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Manage Your Deployment By Monitoring And Reviewing Resource Usage
Oftentimes, a lack of visibility into your cloud can lead to sprawling provisioned services. This makes it difficult to catch idle and unused resources before they drive up costs.
Remain vigilant to ensure that you are actually using the resources you are buying. In the data center environment, it did not matter if dormant resources were left turned on. In AWS, it does. All resources are metered and it is critical to make sure that unused ones are turned off.
Comparing Roi Of Cloud And Traditional It Solutions
There are a number of things to consider when deciding whether to use cloud computing. Many of them were described in Establishing your Cloud Vision. They will usually include ROI. If you propose a cloud-based project, you will be asked how the ROI compares with that of a traditional solution. How do you answer this question?
To make the trade-offs between the factors involved, you need a model of how your project will achieve ROI. This model will typically include assets, revenue, workload, costs, time to deliver, features, quality, and scale. It can be in your head, or can be captured by a more or less sophisticated computer modeling tool. Much of the model will be based on normal financial management factors, such as the relation between investment, revenue, costs, and return. Some of these factors will be affected by considerations that are special to cloud computing.
This section illustrates the process, by showing how our three example companies assess the ROI of their cloud solutions. The illustrations use simplified spreadsheet models, which are available for download from The Open Group website .
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Alternatives To The Roi Formula
There are many alternatives to the very generic return on investment ratio.
The most detailed measure of return is known as the Internal Rate of Return . This is a measure of all the cash flow received over the life of an investment, expressed as an annual percentage growth rate. This metric takes into account the timing of cash flows, which is a preferred measure of return in sophisticated industries like private equity and venture capital.
Other alternatives to ROI include Return on Equity and Return on Assets . These two ratios dont take into account the timing of cash flows and represent only an annual rate of return . However, they are more specific than the generic return on investment since the denominator is more clearly specified. Equity and Assets have a specific meaning, while investment can mean different things.
What Are The Limitations Of Roi
ROI is one of the most common investment and profitability ratios used today. However, it does have some drawbacks. These include the following:
- Inability to consider time in the equation. On the surface, the higher ROI seems like the better investment. But an investment that takes 10 years to produce a higher ROI pales in comparison to a second investment that takes just one year to produce a slightly lower ROI.
- ROI calculations can differ between businesses. Because there are different equations to calculate ROI, not every business uses the same one, making the comparison between investments irrelevant.
- Managers might only select investments with larger ROIs. Some investments with lower ROIs may still increase the value of a business. But suboptimal choices could lead to poor allocation of resources.
- No way to account for nonfinancial benefits. Using the ROI for new computers as an example, a business can use specific dollar amounts to calculate the net profit and total costs to come up with ROI. However, calculating the value of improved worker morale as a result of getting new computers is difficult. Businesses can, however, calculate ROIs for such nontangible benefits by labeling these calculations as soft ROIs, while the calculations made with tangible dollar amounts are called hard ROIs.
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What Are The Benefits Of Roi
Benefits of ROI ratios include the following:
- Generally easy to calculate. Few figures are needed to complete the calculation, all of which should be available in financial statements or balance sheets.
- Comparative analysis capability. Because of its widespread use and its ease of calculation, more comparisons can be made for investment returns between organizations.
- Measurement of profitability. ROI relates to net income for investments made in a specific business unit. This provides a better measure of profitability by company or team.
Business Skills And Capability Improvement
Cloud computing enables access to new skills and solutions through cloud sourcing on-demand solutions. Cloud security tools, for example, improve the businesses capability to protect its data, identify possible threats, and prepare contingency measures to prepare for worst-case scenarios and data breaches.
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Ways Cloud Computing Increases Your Roi
In business, many organisational decisions often come down to a cost-benefit analysis if I spend this much, how much will my organization benefit? And in todays economy, businesses have to make tough decisions regarding particular investments as they cant always guarantee a good enough return.
But this is where the utilization of cloud computing can help to boost your return on investment. By migrating your activity to the cloud, you can take advantages of lower costs, more efficient resource use and scalability to increase your return on investment, for example, in building a new application.
One way in which cloud computing helps to increase your ROI is through decreasing a number of your costs, including capital and operational costs.
With cloud computing, you no longer have to purchase servers for use in-house, resulting in lower data centre costs that help to boost your return on investment. So rather than purchasing huge servers that take up space and take quite a while for the IT department to configure, you can enjoy provisioning servers for a low cost based on the economies of scale that cloud providers are able to achieve.
Building apps in the cloud
As part of the service of provisioning cloud servers, you can also check to see how many CPUs are currently in use to support a particular application, how much this costs and if you are making use of these resources efficiently.
See how much you can save with our savings estimator.
Still Not Sure Where To Start
If your company doesnt have a solid cost intelligence strategy already in place, you might be facing more of a challenge than youre prepared for. After all, its hard to calculate ROI when you have no visibility into your costs, revenue, and the unit economics of each cloud service.
Instead of trying to create something out of nothing, let CloudZero open a window into the previously opaque black box of your companys finances. Helping SaaS companies achieve cost visibility is what we do.
When in doubt, you can even partner with a FinOps specialist who will coach you through devising a cost intelligence strategy that works for your business.
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Roadmap To Develop Your Unique Roi Calculation
Cloud migration is meant to transform, and transformation can make it difficult to prove cost savings, which in turn makes it difficult to calculate ROI. Most cloud ROI calculations focus on IT cost saving and do not include savings based on increased agility or the costs of poorly utilized hardware. In addition, the value of agility is not the same for every government entity it can vary widely. Meaning there are many possible ways to estimate cloud ROI and the actual payoff will be different for each entity.
Before you begin your cloud migration journey, you should determine your objectives, including agility objectives, and assess the financial implications of each objective. In addition to comparing your future cloud costs to current costs, Elyon recommends that you determine the financial impact on your O& M expense budget and estimate on-going operational costs, such as the cost of storage and applications. As far as costing goes, cloud computing is billed differently, i.e., renting time, and itâs expensive to continuously run applications. However, the cloud provides the ability to adjust capacity to meet demand as a way to control costs.
One important item to keep in mind as you develop your unique ROI formula is that cost savings may not be experienced immediately after cloud migration due to one-time setup costs. There may also be other hidden costs, such as training costs and disruption costs as software and solutions are migrated to the cloud.
Ways To Measure Cloud Roi
An initiative from The Open Group has developed a set of key considerations for how to build and measure return on investment for cloud computing initiatives from a business perspective. By examining the benefits cloud computing offers organizations and showing the potential return it can provide from the beginning, companies may find it easier to gain buy-in for cloud initiatives from the executive team, as well as the IT department.
Cloud computing has been described as a technological change brought about by the convergence of a number of new and existing technologies.The promise of cloud computing is identified primarily by the following key technical characteristics:
The ability to create the illusion of infinite capacity performance is the same if scaled for one or one hundred or one thousand users with consistent service-level characteristics.
Abstraction of the infrastructure so applications are not locked into devices or locations.
Pay-as-you-go usage of the IT service you only pay for what you use, with no or minimal up-front investment costs. You typically just use the service through a connection and device.
Service is on-demand and able to scale up and down with near instant availability. Typically, no forward planning forecast is required.
Access to applications and information can be obtained from any access point.
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Measuring Your Return On Investment Of Azure As A Compliance Platform
Posted on October 7, 2019
Today were pleased to introduce the release of Microsoft Azure is Helping Organizations Manage Regulatory Challenges More Effectively, a new International Data Corporation white paper based on original research by IDC and sponsored by Microsoft. IDC studied Azure customers who are using Azure as a platform to meet regulatory compliance needs, with a special focus on government, healthcare, and financial customers. Azure Policy was cited by customers as having an important impact on meeting compliance obligations.
IDC found that these customers are realizing significant benefits by leveraging Azure capabilities to make their regulatory and compliance efforts more effective. Significant findings of research include:
Five-year return on investment of 465 percent, worth an average of $4.29 Million. Six-month payback on investment. 47 percent reduction in unplanned downtime. 35 percent reduction in compliance-related penalties. A 24 percent increase in productivity for regulatory compliance teams.