March 16, 2017 | Written by: Lynn Kesterson-Townes
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Cloud adoption has entered the mainstream.
Organizations are embracing cloud to drive enterprise-wide innovation that improves customer relationships while delivering operational efficiencies.
But how are they measuring the success of their cloud initiatives? What criteria are they using to decide which workloads should move to the cloud? How are they using return on investment (ROI)? What other key performance indicators (KPIs) are they tracking?
Data collection for our latest IBM Institute for Business Value (IBV) study titled “Tailoring Hybrid Cloud” reveals how organizations are evaluating their progress throughout their cloud adoption journey.
Criteria for which workloads move to cloud
Since not every workload is suited to the cloud, organizations must decide which functions should be migrated to the cloud and which should stay on premises. We discovered four predominant metrics that organizations employ to determine which workloads should move to the cloud: cost, security and compliance requirements, timing/speed to market, and estimated ROI.
ROI calculations for evaluating cloud initiatives
In organizations we surveyed, ROI is used extensively throughout the cloud adoption process. Most enterprises (80 percent) say that ROI is a key input for their decision-making process for future cloud initiatives. Nearly as many (77 percent) of executives surveyed are confident in their abilities to effectively use ROI to accurately measure their cloud initiatives. Nearly three-fourths (74 percent) of business leaders say they consistently and objectively compare their achieved ROI with the original, expected ROI for their enterprise cloud initiatives.
ROI calculations are important in evaluating cloud initiatives in other ways. More than half (60 percent) of enterprises use ROI as a process metric to help prioritize their portfolio of cloud initiatives. This popular use of ROI is closely followed by 59 percent of organizations employing ROI as a results metric, measuring the impact of a cloud initiative after it has been implemented.
KPIs for measuring cloud adoption success
More than 50 percent of the executives surveyed rely heavily on financial metrics — principally, cost and ROI— to determine the path to success for their cloud initiatives. We also asked survey respondents to name other key performance indicators they track when measuring the benefits of cloud adoption.
Once again, a financial metric is the most popular. Nearly half (47 percent) of organizations report they track increase in revenue margin. Yet another financial metric, rate of change in the reduction of total cost of ownership (TCO), comes in a close second with 45 percent of executives emphasizing this key performance indicator.
For more findings on how hybrid cloud can answer an enterprise’s unique needs, including more recommendations for getting started, read “Tailoring hybrid cloud: Designing the right mix for innovation, efficiency and growth.”