Shorticle 142 – TCO vs ROI
During Cloud adoption planning and implementation, Total Cost of Ownership (TCO) is an important step where one can use the TCO report as a dipstick to understand the benefits and risk involved in the engagement.
TCO calculation with modern TCO calculators like TSOLogic or Azure TCO calculator includes details on infrastructure (compute, network, storage) as the cost heads whereas originally TCO calculation for large Cloud adoption should include cost incurred in current Data center on peripheral charges like Power backup, electricity consumption charges to name a few.
The key cost heads for TCO calculation are
· Initial Costs – Typically one time investment for embarking the cloud journey and decommissioning existing Datacenter services.
· Ongoing Operational Costs – The operating costs in running the Estate in the Cloud platform.
· Maintenance Costs – The costs incurred in management and maintenance of the estate in Cloud platform including support resources, health check monitoring etc.,
· Residual Costs – The Salvage costs at the end of life and the costs incurred to decommission.
On the other side, Return of Investment (ROI) is a cost calculation mechanism to understand the benefits derived from cloud adoption over a stipulated period of time (eg: 1 year or 3 years). ROI is calculated as percentage (eg: 30% benefit of migrating Data lake to AWS from current Datacenter cost incurred).
From an Enterprise management perspective, there is always a question on which is important to consider TCO or ROI. Both are talking about investment per cost heads but with different viewpoints between them. TCO is about the costs involved in the cloud adoption journey as stated in above points whereas ROI is about the costs factors, which can benefit the organization and anticipated outcome of the journey to understand the business value in cloud adoption.
For further read: https://technologyfinancepartners.com/2019/07/tco-vs-roi/
#magtechbytes #wipro #shorticle #shorticlecloud
Help orgs assess and migrate workloads to cloud and develop cloud native applications ? Cloud Architect ? Azure Solutions Architect ? 6x Azure ? 2x SQL Server ? GCP ? Terraform ? AI Enthusiast | Free Timer
2 年"Cloud adoption should include cost incurred in current Data center on peripheral charges like Power backup, electricity consumption charges to name a few." - Could you pls clarify Dr. Magesh Kasthuri why mentioned charges should be included in the TCO in public Cloud ? This make sense only for private cloud, but not public cloud. "Residual Costs?– The Salvage costs at the end of life and the costs incurred to decommission." - Should this cost not be zero in case of public Cloud? This might matter in private or hybrid cloud. "Return of Investment (ROI) is a cost calculation mechanism to understand the benefits derived from cloud adoption over a stipulated period of time" - Should we not calculate TCO for current estate be it data center and /or private cloud or another cloud ? If time permits, pls clarify. Thank you!!