Three Ways CIOs Must Rethink Cloud ROI

David Rowe
Chief Product Officer & EVP, Global Transformation
4 min read
Three Ways CIOs Must Rethink Cloud ROI

While cloud workloads will continue to grow, savvy tech leaders must take a step back and evaluate the true ROI of moving to the cloud. Here’s three ways to get started.

If there’s one habit CIOs should consider adopting, it’s a commitment to take a critical look at their cloud Return On Investment (ROI). Over the last decade, we’ve seen cloud computing evolve from a low-cost server hosting option for startups, to a bedrock technology for enterprises, as the paradigm shift of pay-as-you-go compute power has transformed how businesses approach scalability, innovation, and operational efficiency.

But despite its popularity, there are a few things enterprises must consider carefully before they adopt the cloud — things like the risks of vendor lock-in, the pressure of migration mandates, and security and compliance issues. With the options available today and the unique demands of each business, organizations must adopt the cloud with purpose rather than “just because.” That’s why from our point of view, rethinking cloud ROI is prominent among IT mandates for 2024 and beyond.

1. Vendor lock-in drains organizations’ power

One driver that’s causing CTOs to rethink their adoption of cloud applications, especially in the ERP space, is the potential for vendor lock-in. Traditionally, organizations paid a one-time fee for an ERP software license that they would then host on their internal servers. But there’s been a shift across most enterprise software vendors as they now push enterprises to move to cloud-based subscriptions. This change allows vendors to charge recurring fees that include not only the software license but also the hosting infrastructure and support plan. And the costs can add up quickly. In many cases, your fully-paid-for, perpetually-licensed software may be a high value asset worth retaining and “sweating” to extract as much value as possible.

In fact, a Censuswide Buyers Sentiment Survey has already found that 42% of IT leaders are concerned about the potential for vendor lock-in of these cloud-based ERP solutions. And rightly so. When an enterprise decides to migrate to a vendor’s proprietary SaaS offering, they may have limited control over the specific technologies used and the extend of customization possible; the resulting vendor dependence might impact business goals and outcomes such that they must adapt to the scope of cloud capabilities.

This shift in power may impact your business-driven IT roadmap—where technology investments are aligned with business goals, priorities, resources, and timing—as you adapt your plans to follow the pace and releases the vendor-driven roadmap. Such a situation is an example of how a cloud strategy can hinder rather than accelerate innovation.

In 2024, CIOs will continue to find themselves questioning the efficacy and efficiency of placing all their eggs in a single basket and demanding to see the ROI of surrendering to a single vendor – not just the software license but also the hosting and support services.

2. It’s not as simple as “plug and go”

While the cloud promises elasticity and scalability, not all workloads are the right fit for the cloud. Taking the time to move internal legacy software and applications that are running just fine to the cloud just for the sake of staying “up” on new technology may not be the right approach. Frequently, these mission-critical applications must be retooled and refitted for the cloud; rarely if ever is it a simple lift-and-shift operation. So you have to consider: is the effort worth the cloud’s promises?

The same can be said for organizations choosing to move their ERP software. This is particularly true if the organization recently made a large investment in procuring a license and standing up internal hardware to support it. Rather than changing gears and rushing to the cloud, these organizations should be asking whether it’s necessary to move the system in the first place.

We’ve noticed an increasing trend of “cloud repatriation” — where organizations move their data and applications back to an on-premises data center or to a private cloud, which gives them more control. And as IT leaders take a critical look to maximize cloud ROI, we expect this trend to continue in 2024. Vendors may be pushy about their cloud-based solutions, but considering how many enterprises desire to maximize their on-premises ERP solutions, we think composable ERP solutions may be a middle-ground alternative.

One of the guiding principles of composable ERP is the focus on business outcomes. Where cloud-based solutions want to force unique business needs into a vendor’s rigid IaaS solution and control the IT roadmap, composable ERP honors businesses as a whole: goals, needs, and everything else. Composable ERP unites people, vendors, solutions, and technologies in a modular way that yields the ultimate solution for your business.

Composable ERP encourages customers to take a critical look at the technologies that will best serve their desired outcomes — not move for moving’s sake. This often includes cloud-based tools and technologies, but taking a critical look gives organizations the space to find the balance of what works for them and not what software vendors dictate should work.

3. Assessing cloud security and compliance

As data breaches and cybersecurity threats continually evolve, it’s crucial for CIOs to reassess the security and compliance aspects of their cloud strategy, evaluating their cloud provider’s security protocols and capabilities to meet evolving regulatory requirements. This focus is increasingly vital as data privacy regulations become more stringent globally, and cybersecurity threats become more sophisticated.

For example, a recent study by Thales found that 39% of businesses experienced a data breach in their cloud environment in 2023. The study also found that more sensitive data is moving to the cloud, with 75% of businesses saying more than 40% of data stored in the cloud is sensitive, but that, on average, only 45% of this sensitive data is encrypted. And the stakes are high: CSO Magazine reports that the average cost of a data breach is around $4.35 million, according to IBM.

The bottom line? Ensuring robust data protection and regulatory compliance not only safeguards the organization but also builds trust with customers and stakeholders. CIOs must ensure that their cloud investments are not only cost-effective and efficient but also resilient against emerging security risks and compliant with the latest data protection laws.

4. Get your head out of the clouds: Focus on ROI

While cloud workloads will continue to grow, savvy tech leaders must take a step back and evaluate the true ROI of moving to the cloud. There are certainly many benefits to a cloud-based operation, but adopting this technology simply because it’s on the cutting edge may not be the best solution for everyone. To be successful, IT leaders must focus on how a move to the cloud might affect their ROI — that’s a commitment that is sure to pay dividends.

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