Hybrid Cloud Strategy and How to Quantify ROI

A hybrid cloud strategy will enable your enterprise to maintain control of critical data without sacrificing agility or resilience. An understanding of how workloads affect operating expense, security risk and profitability is vital in determining and optimizing Hybrid Cloud Return on Investment (ROI).

The Factors That Determine Hybrid Cloud Strategy ROI

To determine the ROI of your hybrid cloud strategy, you will need to first analyze workloads for some influencing factors: risk, profitability and operating expense, to name a few. Although this exercise appears daunting, it is rather simple once you understand the logic of building an ROI model and how to classify hybrid cloud workloads. Just follow these simple steps and pay attention to the recommendations below, so you too can create an ROI model for your hybrid cloud strategy.

The ROI of any hybrid cloud strategy is determined by mitigating risk, lowering operating expenses and increasing profits. You can get started by creating a master list of all your VMs, either by exporting a list of VMs from Azure, VMM or another service. Although this list will likely contain extraneous information (like deployment model and availability set), it provides critical information like size, location and name. Once you have this list documented in a spreadsheet, add columns to help you classify for risk, profitability and operating expense.

Quantifying Risk of Your Hybrid Cloud Strategy

Risk mitigation is an underutilized factor when it comes to determining the ROI of a hybrid cloud strategy. However, it's one of the most important. According to the Ponemon Institute's 2017 Cost of a Data Breach Study, the average security incident costs an organization $3.62 million. The figure includes expenses like legal fees, reputational damage, government fines and more. Because you have more control over your private cloud workloads, it only makes sense to host high-risk workloads on-premises rather than a public cloud environment where you don't have visibility into tenant access, security protocols or physical on-site management.

Quantifying Profitability of Your Hybrid Cloud Strategy

Some workloads, like web applications and e-commerce sites, are only as profitable as their ability to scale. If degradation in VM performance can impact sales, customer support, or other transactional business functions, then it is critical to ensure an agile and resilient environment. Fortunately, this is one of the public cloud's greatest strengths. Public cloud platforms like Microsoft Azure and AWS have nearly unlimited resources for computing, storage, memory and more. The pricing structure of the public cloud makes it so that as your online transactions increase, your expenses also increase. However, if you have a firm grasp of business analytics, you can quickly model out a profit-to-expense ratio (sales/cloud costs). In other words, the ROI of your hybrid cloud strategy is fundamentally dependent on your ability to understand your organization's unique profit model.

Quantifying Operating Expense of Your Hybrid Cloud Strategy

It's no secret that many organizations consider hybrid cloud as a means to save money, but most companies do not take the time to project the operating expenses of maintaining private cloud and public cloud instances. According to David S. Linthicum, chief cloud strategy officer at Deloitte Consulting, you can calculate public cloud costs with the following formula: Cloudops Cost Per Year = ((NW*CW)*COM)+((NW*CW)*SR)+((NW*CW)*MR). The definitions of his variables are as follows:

  • NW: Number of workloads under cloudops
  • CW: Complexity of workloads (on a scale of 1.01 to 2.0)
  • SR: Security requirements (on a scale of 100 to 500)
  • MR: Monitoring requirements (on a scale of 100 to 500)
  • COM: Cloudops multiplier (on a scale of 1,000 to 10,000), based on resources used, including the cost of cloud services and the cost of people

Quantifying the operational expenses for private cloud workloads is a little different; you have to take into account other variables like hardware costs, energy costs, management costs and any other variables attributed to an on-premises model. If the operational expense of hosting a workload in the public cloud is above average, and you have the capacity, it may make sense to store it in your private cloud.

Using Unified Management Platforms to Optimize Hybrid Cloud ROI

Operating expenses typically include 3rd-party software that your staff would use to migrate, manage, monitor, backup and secure hybrid cloud workloads. When you purchase these solutions separately, the operating expenses skyrocket; licensing fees, professional services, training and maintenance are all factors that fit into the equation. However, unified cloud management solutions like 5nine Cloud Manager include hybrid cloud migration, management, monitoring, backup and security features as part of their standard offering. Not only does the 5nine Cloud Manager have the potential to save you thousands in operating expenses, but it can also help mitigate risk and optimize workload profitability. For a better understanding of how 5nine Cloud Manager can maximize the ROI of your hybrid cloud strategy, please contact one of our hybrid cloud solution specialists.


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Ryan Oistacher

Ryan Oistacher

I am an author, speaker and technical evangelist focussed on Microsoft Cloud management and security. I’ve held product management and product marketing roles at early stage startups and enterprise software vendors, all with an emphasis on Microsoft technologies. As the Senior Evangelist for 5nine, I get to share the 5nine story with audiences all over the world. I talk, I blog, I record videos, and I spread the word via social media.

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