Moving to the cloud yields numerous benefits for organizations, from increased efficiencies to lower IT-related capital expenses ─ at least that’s what industry pundits, cloud service providers, the media, and others “in the know” tell us. But how do you measure the success of a cloud migration and ensure the promised benefits are realized? How do you translate vague statements such as “increased efficiencies” into business results that can be measured?
Define Cloud Success and Align Goals
To assess your cloud success, start by defining what “success” means – in terms of your organization’s use of IT and to your organization’s overall business goals.
Next, align your IT success factors with the organization’s business goals. Some will be easy, such as cost savings and increasing process efficiencies. Others will require more work, such as determining how the cloud can drive greater innovation than would be possible with solutions based in an on-premises data center. Don’t limit this exercise to just your IT or application development team.
Reach out to other departments and disciplines without your organization for input as well. Chances are they’ll be directly affected by a move to the cloud and continued cloud usage. How they define “success” matters.
With your IT success factors and the organization’s business goals aligned, identify your key performance indicators (KPIs). Don’t limit them to those that result from a comparison between on-premises and the cloud. Also, look at those associated with your cloud migration and post-migration optimization efforts. Importantly, determine how you’ll measure them. Use metrics whenever possible. Case studies and user stories are also useful when metrics aren’t available.
While KPIs will vary from organization to organization based on business requirements, goals, and other factors, the following KPIs provide a starting point.
1. Financial KPIs
While there are many reasons for migrating to the cloud, the financial benefits are often the most desired aspects when considering cloud success – and the ones more likely to gain C-suite support. To establish them, you’ll want to compare your on-premises and cloud environment costs, calculate your migration costs and cloud operational costs, and look at profitability and cash flow.
On-premises vs Cloud Costs
Compare your expenditures for running an on-premises data center with what you’ll be paying for the cloud (or are paying if you’re doing this after the migration). This includes:
- Direct costs for your on-premises data center, including hardware such as servers and software, and indirect costs such as lost productivity suffered during downtime.
- Power and facilities. Calculate the costs for running an on-premises data center, such as electricity, lease payments, security, fire safety, etc.
- IT staffing. Look at your staffing needs and costs for an on-premises data center. Does moving to the cloud reduce any of them? Does it free up your staff to focus on more strategic endeavors that have the potential to generate greater revenue or facilitate innovation?
Calculate your cloud migration costs including:
- Architecting your cloud environment (or environments).
- Preparing applications and data to move to the cloud, such as rehosting or re-architecting your applications.
- Running parallel environments during the migration.
- Downtime or any disruptions to business operations.
- Staffing/management time/costs.
- Data transfer fees.
- The use of third-party companies and consultants.
Cloud Operations Costs
Document your costs for:
- Cloud hosting. There are several online calculators available that can give you a general idea of cost without complete specifications for your new cloud environment. One to consider is Amazon Web Services (AWS) Total Cost of Ownership (TCO) Calculator, which enables you to compare the cost of using the AWS cloud to the cost of housing your applications in an on-premises or traditional hosting environment. AWS also offers its Simple Monthly Calculator, which allows you to estimate your monthly AWS bill.
- IT staffing costs. Has spending gone up or down? Have you incurred more or less costs for staff training or certifications?
- Security. Has moving to the cloud required new expenditures to ensure security or compliance? Has it reduced your security costs?
- Cost of third-party partners and tools. Are you paying for third-party services and tools to help manage your cloud environment and if yes, how much? What value do the partners and tools provide? Is it quantifiable?
- Cloud IT costs as a proportion of all business spending. Have they gone up or down against your on-premises benchmark? If you’ve been operating in the cloud for some time, then look at your overall cloud spend to find ways to become more cost-efficient.
- Budget variance. Is your cloud spending aligned to your budget? Are your budget figures realistic? Review them to determine how the cloud fits into your budget over time.
Profitability and Cash Flow
Determine the financial impact of cloud operations on your business performance in terms of:
- Savings. Are your cloud-based solutions saving your organization money? Look at your comparison of costs for your on-premises data centers and the cloud, staffing costs, etc.
- Net profit. Has moving to the cloud had a positive impact on profits and if so, how?
- Operating cash flow. Has the switch from CapEx to OpEx improved cash flow?
- Revenue. Are your cloud-based applications helping to bring in more business, but increasing customer referrals, creating new revenue streams, and facilitating the creation of new products and services?
- Customer growth. Is there any correlation between the move to the cloud and the growth (or decline) of your customer base?
2. Governance KPIs
Meeting cloud governance KPIs also helps demonstrate the benefits of the cloud to your organization, particularly in terms of keeping costs and security under control. Assess this by looking at:
- Internal audit cycles. When comparing cloud and on-premises costs, determine whether it takes more or less time to audit IT costs.
- Compliance. Does your cloud environment meet your compliance requirements? Are you able to avoid costly penalties and fines due to non-compliance?
- Cloud visibility. Do you have full visibility into your cloud environment, especially in terms of your security posture?
- Cost control and allocation. Are you making efficient use of your cloud infrastructure, and continuing to optimize your use of cloud resources? Can your organization’s finance team allocate costs and implement chargeback systems?
- Consolidated billing. Are you consolidating cloud accounts to take advantage of discount plans and usage thresholds?
- Reporting accuracy. Is cost reporting more accurate than it was for your on-premises environment?
3. Business-Value Cloud KPIs
Establish KPIs that measure cloud success along the lines of how the cloud is generating benefits that provide long-term value to your business. That includes those associated with agility and performance, customer satisfaction, and technology usage.
Agility and Performance
Evaluate improvements in IT service including:
- Performance targets. Is application performance in line with expectations? What about incidents, faults, and change requests?
- Service availability. Compare any downtime or service disruptions you’ve experienced with the cloud compared to those experienced with your on-premises hardware.
- Process efficiencies and improvements. Are processes and key functions taking less time or resources? Are there fewer errors?
- Project turnaround times. Are your cloud projects on schedule? Are the services you’re providing users/employees/stakeholders better via the cloud compared to your on-premises data center?
- Market responsiveness. What new services have you developed because of the move to the cloud, and are more services in the pipeline? Are you seeing a faster time to market?
- Customer responsiveness. Does the cloud help your organization more quickly adapt to changing customer demands and preferences? Is the organization able to take better advantage of data and analytics, courtesy of the cloud, to understand customer needs and interests – and deliver what they want?
Customer and User Satisfaction
Determine how satisfaction is increasing for your customers and users, which in turn can lead to greater loyalty, recommendations, and referrals. You can do so by measuring:
- Application latency. Are your new cloud-based applications working faster than legacy, on-premises solutions?
- Conversion rate. Is your website converting more site visitors?
- Customer support. Are you providing a smooth, efficient customer experience? Are your website pages, including FAQs, helping to reduce the number of calls to customer support?
- Retention rates. Are you seeing an increase in repeat customers/users with the cloud as compared to your on-premises environment?
- Customer/user satisfaction surveys. Do the responses point to any issues in the customer/user lifecycle? Look to online benchmarks like the Net Promoter Score (NPS) to help you evaluate this metric.
- Are you seeing better ROIs and reduced technical debt by using the latest technologies that are available now that you’re in the cloud?
- Is your organization leveraging more open-source technologies, courtesy of the cloud, to reduce workload development and operations?
- Is your organization making greater use of automation to reduce manual tasks and speed up responses to things like configuration changes or sudden workload increases?
Learn More About Measuring Cloud Success
You’ll find many great resources online to help you set and assess KPIs for your organization’s cloud journey and understand how to calculate the costs of your cloud environment and cloud migration – including from ClearScale.
Here are some to consider:
You’ll also find useful information from AWS here.
ClearScale has helped hundreds of organizations migrate and modernize on AWS. Learn how our cloud migration services can help you complete a cost-effective migration that will meet your KPIs and business goals. Contact us now.