The Importance of Intangibles in Cloud TCO Analysis

Ravi Rajagopal, Vice President at CA Technologies, has led and managed organizations that delivered innovative and practical technical and business solutions for corporations and governments around the globe.

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In my last post, I discussed how the cloud changes the economic value of IT, and revealed a new model to understanding TCO and ROI. That’s the only way an organization today can make rational decisions about IT investments.

One of the most popular cases for adopting the cloud is that it promotes organizational agility. Once you go cloud, the argument holds, the organization can now do things it never could do before, or can do established things much faster.

Cloud Expands Horizons

As an example, I know a company that recently switched from an on-premise call center to cloud-based solution. Among other things, moving to a cloud service now meant they could hire people all over the world, wherever there was an IP connection. Before, employees had to be on-premise at a limited number of locations.

They gained access to a much larger labor pool. They could offer more flexible hours to employees, and even let them work from home or while traveling. And they opened up to new geographic markets they couldn’t even dream of servicing before. That’s agility.

If we’re talking about making rational economic decisions about the cloud, how can we account for the transformative impact it can have? This is hard to quantify beforehand, as are many hidden infrastructure costs in IT. Most organizations remain blissfully ignorant about the full impact of these intangible costs.

Focus on the Intangibles

That makes it hard to arrive at a good, hard-dollar decision. But if you don’t focus on the intangibles, you won’t have a complete picture of the hard numbers. Once you have a handle on tangibles, start perimeterizing the intangibles. They might not be core to the decision, but you can get a sense of their boundaries.

And the more data you have, the better the organization will be at making the decisions. That company that moved to a cloud-based call center? Their move to the cloud was initially close to break-even. Their understanding of the intangibles served to reassure them that they were making the right decision, economically and strategically.

What are Your Outcomes?

One way to measure the intangibles is to focus on the outcomes rather than on the inputs. You could, for example, start looking at some of the customer statistics, both in absolute numbers and in overall trending. For that to happen, you need a good baseline. You must also work with the same questions and parameters so you can make a valid before-and-after comparison.

For example, you have the customer stat baseline that’s set before you made the transition. Once you’ve made the transition, you look again at your customer stat parameters. That will tell you whether you’re moving in the right direction, and how you can optimize your execution.

Above all, it’s essential you understand your legacy environment, both tangible and intangible, so you can make a fully informed decision beforehand. Then, when you make the transition, you’re in a great position to compare.

The broader discussion here is that there are substantial benefits to being a data-driven organization, which many organizations are not. Most businesses are measuring some things, but few are measuring everything. If you’re not a data-driven organization, taking a holistic approach to cloud TCO analysis is a great way to get started on becoming one—and the best, and perhaps only way, to really measure the cloud for business value.

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