Mar 9, 2015

A CFO’s Guide to the ROI of On-Demand Hybrid Cloud

Cloud ROI tools are everywhere. So are methods meant to approximate the cost benefit ratio of cloud technologies, and what they deliver. A lot of this is possible because, generally speaking, the benefits of the cloud are pretty well-known:

  • Reduced upfront CapEx hardware investments
  • Reduced upfront CapEx software investments
  • Pay-as-you-go flexibility
  • Less OpEx because of less need for an internal IT operations staff

The ROI of On-Demand Hybrid is a bit more difficult to gauge, but when done right, it is actually much more advantageous than the cloud ROI alone. In the context of the Hybrid Cloud, traditional cloud-based ROI calculations can actually end up oversimplifying and under-representing the big picture of the savings. The numbers rarely look deep enough into the kinds of issues your organization is facing or the benefits that can come out of the right strategy.

Why is calculating the ROI of On-Demand Hybrid Important?
Modern applications have high-performance demands – that means they need an infrastructure designed to handle peak access times, high transaction rates, databases, network and security elements. It’s complex, and often difficult to predict; components need replacing, apps need updating and capacity estimates are exceeded.

As CFOs, we see it all the time, don’t we? But ROI calculations are static — tied down with figures such as capital, operating costs, business process and time to deploy — just like your static infrastructure. With the rapidly changing nature of infrastructure and applications, isn’t there a better way to build and justify your business critical applications?

What Does Hybrid Look Like?


Context for On-Demand Hybrid ROI Calculations
Building out an On-Demand Hybrid infrastructure requires a dynamic, complex and customized assessment of several factors to come to realistic numbers. In other words, this kind of assessment requires context. That’s because every organization is different: different workloads, different audiences, different cost structures and different architectures. The variables can be unending, which is what makes coming up with exact numbers so difficult.

At Codero, we see these stories all the time from our customers and partners. Calculating the ROI of On-Demand Hybrid means you need to adjust the typical Cloud ROI models.

The Additional Benefits of On-Demand Hybrid
On-Demand Hybrid gives businesses benefits in performance and the customizable capabilities of a dedicated solution, while enjoying the dynamic benefits of cloud computing. Bringing that cloud capability into the fray when required, On-Demand is a very big step; its list of advantages is many, and this list is part of the ROI formula:

  • Elastic provisioning
  • Capacity utilization management
  • Opportunity for cost controls while taking on compute initiatives
  • Optimized cost of ownership
  • Consistent and measurable costs
  • Rapid pace of change – embracing new apps, configurations, development, technology

If we start to reflect on ROI, and how it is most quickly achieved, that’s where On-Demand Hybrid infrastructure shines, with savings on operating cost, hardware investment and enhanced features allowing you to control long-term cost. Behind that rapid ROI is business value, speed to market, minimized investment and reduced management. The cost factors are individual to every environment, but On-Demand Hybrid can take the moderate ROI of dedicated solutions and accelerate them. It’s a common platform for systems to run because it only requires minimal configuration. The environment takes less time to set up, has fewer pieces and the usage can be managed to align with your design and budget.

The Real ROI of On-Demand Hybrid
A curious side effect also occurs as hybrid solutions are deployed: the advantages start to affect other existing IT investments and projects. With rapid access to faster and better infrastructure, instant access to scale when needed and operational efficiencies that come from implementing the On-Demand Hybrid cloud environment, your IT is free to improve elsewhere – as though a giant weight has been lifted off its shoulders. Unleash your applications, empower your people, serve your audience well – it’s all part of the success snapshot of On-Demand Hybrid.

The numbers in the following comparison vary depending on your particular situation as power, salaries, and many other factors vary from region to region. Here you can see some some cost models that represent the actual costs of running and maintaining your own on-premise servers.

The projected the annual cost for running just one Linux server at over $163,000.
That includes:

  • Data center hardware
  • Operating system, utilities, database, and other infrastructure software (applications software costs are not included)
  • Storage hardware and software
  • Server admin personnel
  • Data center supplies, except for printer supplies
  • Other data center costs, such as facilities, data center outsourcing, disaster recovery, offsite storage, and data center overhead
On-Premise Hosted Solution
1 Year 5 Year
CapEx Server HW for five servers $7,640 $22,920
Storage HW + SW $12,580 $25,700
Networking HW + SW $84,000 $88,000
OpEx Infrastructure Admin $38,040 $196,123
Power & Cooling $4,631 $$24,344
DC Space & Office Space $18,000 $90,000
Other + Tax $4,905 $5,914
Total $169,796 $453,001
Codero On-Demand Hybrid Hosted Solution
1 Year 5 Year
CapEx None None
OpEx Database Servers (two servers) $9,176 $45,833
Cloud Servers 9three instances) $504 $2,520
Codero Hybrid Network 100Mbps $780 $3,900
Storage (4TB NAS) + Win08 Enterprise $2,664 $13,320
Networking & Security HW (50GB Offsite Backup & Firewall $1,620 $8,100
Infrastructure Admin $3,804 $19,612
Power & Cooling $ included $ included
Infrastructure Admin $ included $ included
Other + Tax $ n/a $ n/a
Total $18,539 $93,285
Savings Over On-Premises 9.2x 4.9x
% Savings 89% 79%

Note that these needs can vary from situation to situation. However, this is still a solid base to evaluate costs.

When compared against each other, the savings are significant. Even more compelling is the fact that you can start your hybrid configuration right away, get to market quicker and adjust these costs based on your on-demand configuration by renting the capacity you need, when you need it.

With the right strategy, a focused mission across disciplines in the organization and with the diligence of vetting out the right partner and provider, your On-Demand Hybrid cloud solution can be a tremendous success, meeting the demand on the table. Moreover, you’ll find yourself blowing past your goals, and leaving those old ROI estimates in the dust. On-Demand Hybrid is the future of the cloud. Companies are finding the powerful benefits of customizing a solution that is right for their specific needs looking them right in the face.

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