Smart SaaS ROI Calculations

In an April InformationWeek Analytics survey of 393 business technology pros, we asked which of nine factors had the greatest likelihood of being incorporated into an ROI study at their companies on the business value of cloud computing. If you think operating expenses are the top consideration, you think wrong: No. 1 is initial capital expenditures, No. 2 is ongoing capex. Operating expenses for the life of the project came in third.

That's not so surprising considering the cloud model matured at a time when CIOs were desperate to keep moving forward even as capital budget cuts forced us into maintenance mode. Your initial pitch for software as a service probably focused on the low, predictable monthly cost and savings on licensing and hardware. Now, however, some creeping expenses are getting tracked back to you. First, it was upgraded bandwidth, then the request for better monitoring tools, then the small revolution that started when you forgot to let the cloud CRM system know when customers are on credit hold. Those depreciation savings that used to accrue from owning systems? Not so much. Your ROI model is suddenly so shaky the CFO even stopped calling you "The Man."

It's a common problem. Too many SaaS ROI models are done on a two- or three-year cycle, despite the fact that most organizations end up using applications for five to seven years. In addition, you need to make sure your model includes all of the items we've listed in the story above: data integration, increased bandwidth, security staff budget, application monitoring upgrades, and the cost for improved redundancy.