Home Cloud Computing This would be a good time to test your cloud ROI

This would be a good time to test your cloud ROI


Enterprises have been moving steadily to the cloud for years, often paying for multiple cloud platforms — and the COVID-19 pandemic greatly accelerated that trend, as businesses closed offices and outsourced their on-prem operations. 

Now, as the pandemic seemingly winds down and workers are returning to the office, several questions arise: Has anyone on your team run an ROI analysis on your cloud use? Is your company actually saving money? Is the cloud-centric environment indeed more scalable and secure than your team can deliver internally? Has someone — anyone — recently done the math? 

David Heinemeier Hansson, the co-owner and CTO of 37Signals (maker of Basecamp and HEY), argues that many have not — and they need to. With 2023 just around the corner, and the need to support fully remote workers with cloud-based apps and software waning, this is the time to crunch some numbers. 

The role of accounting

Part of this ROI disconnect involves accounting categories. A CFO, for instance, can reject a request for additional IT staffing —and then approve a much larger expenditure for cloud investment. That can happen because IT costs could be considered Capital expenditures (CapEx) and cloud costs could be considered Operating expenses (OpEx), Hansson argued. That separation can make it more difficult to recognize whether the tradeoff makes financial sense to the overall enterprise.

Like everything in accounting, there is a lot of interpretation. Hyoun Park, the CEO and principal analyst for Amalgram Insights, agrees that accounting techniques could obscure the costs of the cloud. But it may not be an OpEx versus CapEx issue. 

“The (accounting) complexities can get pretty nuanced,” Park said. “CFOs start thinking about ratios and metrics that might not make sense for straight-forward profits. Cloud is considered cost of goods sold and IT hiring would be seen as an investment for a longer period of time. A lot of companies focus on revenue per employee, which is top-line revenue divided by the number of employees. That is a metric that is fairly common as part of CFO compensation.”

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