The ROI from Private Cloud Computing

In surveys executives repeatedly express their preference for private clouds due to the perceived greater control and better security. Still, a private cloud needs to generate a ROI justify the investment. Private clouds don’t come free.

Assessing the ROI of private cloud is possible but not straightforward. Additionally the recent economic recession has pressured corporate profits, leading organizations to cut technology spending and limit further investment in cloud, which makes an ROI analysis even more important, according to Cloudtweaks.

Leading researcher IDC notes that many of today’s private cloud business cases are being anchored by savings from application rationalization and IT staff productivity improvements in addition to expected optimization of hardware assets. And unlike the public cloud, which promises to shift IT spending from CAPEX to OPEX, private clouds can actually drive increases in CAPEX since sooner or later the organization is likely to invest in new servers and storage optimized for virtualized cloud service delivery and in management automation.

A private cloud is a virtualized pool of IT resources sitting behind the corporate firewall. Since these are your resources and reside within your security umbrella they offer the promise of greater control and security. The security and control, of course, is only as good as your IT security and control has been all along. Actually, it could get worse since the private cloud typically delivers IT capabilities as services to more of your workers who may use them more widely and more frequently and in new and different ways due to increased accessibility.

The private cloud changes the IT delivery model. IT truly becomes a services delivery operation deploying and delivering IT capabilities as services through the private cloud. Users will access these capabilities on demand as services, often through a browser or even a virtualized desktop.

The great value of the private cloud comes from the business agility it enables. The virtualized pool of IT resources that makes up the private cloud can be allocated and reallocated quickly and easily to meet changing business needs. Instead of requiring weeks if not months to develop and assemble the IT hardware and software resources necessary to support a new business initiative, those resources can be allocated from the pooled virtual resources, possibly with some configuration changes, in minutes or hours (provided, of course, sufficient resources are available). With a private cloud, in effect, you can change the business almost on-the-fly and with no additional investment other than a few clicks of the mouse.

As CIO, how are you going to put a value on this sudden agility? If it lets the organization effectively counter competitive challenges, seize new business opportunities, or satisfy new customer demands fast and easily it could deliver astounding value. It all depends on the business leadership. If top managers aren’t terribly agile thinkers, however, the value might be minimal.

Other benefits from a private cloud include increased IT productivity and efficiency, the ability of business users to self-provision the desired IT resources (with appropriate policy-based automation controlling the provisioning behind the scenes), and an increased ability to monitor and measure IT consumption for purposes of chargeback or, as is more likely, show back. For top management, show back may have big appeal, notes Jason Cowie, vice president, Embotics, a private cloud management software provider.

The private cloud, however, will likely entail additional investments. Although you can repurpose existing IT resources, soon you will want to invest in new resources with more capacity that has been optimized for the demands of what amounts to a new kind of delivery of IT capabilities. You also will want to invest in management automation to ensure efficient service delivery, monitoring, measurement, chargeback, and self-provisioning.

In the end, the value of private cloud agility when matched with agile thinking business leadership should more than offset the additional investments required.

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